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Wednesday, 25 September 2002

FOUNDATION OF THE BAKU-TBILISI-CEYHAN PIPELINE LAID

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By Gulnara Ismailova (9/25/2002 issue of the CACI Analyst)

On September 18, the building of the Baku-Tbilisi-Ceyhan Main Export Pipeline was launched in Baku. The significance of this event was illustrated by the presence of the Presidents of Azerbaijan, Heydar Aliev, Georgia, Eduard Shevarnadze, and Turkey, Ahmet Necdet Sezer, as well as the U.S.

On September 18, the building of the Baku-Tbilisi-Ceyhan Main Export Pipeline was launched in Baku. The significance of this event was illustrated by the presence of the Presidents of Azerbaijan, Heydar Aliev, Georgia, Eduard Shevarnadze, and Turkey, Ahmet Necdet Sezer, as well as the U.S. Secretary of Energy Spencer Abraham, With spades, they laid down the "first stone" of the pipeline's foundation, and buried a time-capsule of stainless steel with a message to future generations.

The 1730 km pipeline will be welded from 144,000 steel pipes with a diameter of 42 inches. Construction will take 30 months, and the capacity of the pipeline will be 50 mln tones of oil per year. To fill the pipeline with oil will require 10 million barrels of oil. The cost is estimated at just under $3 billion. Actual construction works will begin in spring 2003 and be finished by autumn 2004. After putting the MEP into operation, the annual income of Azerbaijan should be between $700 million and 1 billion, depending on export prices, calculated at $20-25 per barrel.  In other words, by 2010, Azerbaijan's oil income may reach $ 5bln.

According to the executive director of the State Oil Fund of Azerbaijan (SOFAR) Samir Sharifov, it is possible that figures would change during the work. It is known that the expenses on building MEP are divided into 2 parts, investments of participant companies (30%) and loans from international financial institutions, export credit agencies and commercial banks. The stockholders of this project are presently: B? - 34,76%, SOCAR - 25,00%, Unocal - 8,90%, Statoil - 8,71%, T?AO - 6,87%, ENI - 5,00%, TotalFinaElf - 5,00%, ITOCHU Oil - 3,40%, Amerada Hess - 2,36%, Japan Inpex  - 2.5%.

Speaking at the ceremony Azerbaijani President Heydar Aliyev noted that the launching of the Baku-Tbilisi-Ceyhan oil pipeline is the result of 10 years of hard work on the realization of Azerbaijan's oil strategy. "Beginning in September 1994, after the 'contract of century' had been signed, numerous attempts were made by external forces to upset or postpone the realization of Azerbaijan's oil projects. But neither threats, terrorist acts, nor pressure could force Azerbaijan to give up its chosen way. The realization of the project would have been impossible without the political and moral support of the U.S. The building of this pipeline, and of the Baku-Tbilisi-Erzurum gas pipeline, will allow to the strengthening of stability and security in the South Caucasus region and bind Azerbaijan, Georgia and Turkey closer together", the President said.

Speaking at the ceremony, U.S. Secretary of Energy Spencer Abraham emphasized one more time that the exploration of Caspian energy resources and the BTC pipeline is one of the most important facets of the U.S. regional strategy. He read a letter from the U.S. president, expressing hope that BTC would help strengthen independence of regional countries. Besides, the heads of state of France, Norway and the UK sent their congratulations.

Only Russia among regional players did not send its congratulations. According to some analysts, the fact that Russian companies are not involved in the MEP reduces Moscow's chances  to influence the countries taking part in this project. Projections that the Russian company Lukoil would join the stakeholders in the pipeline did not come true. Russia will lose billions of dollars as oil and gas flows from the Caspian region outside its territory.

Almost all Russian mass media including TV ignored the event in Baku, and even where some publications appeared covered it, they did so with negative comments. President Putin did not consider it necessary to congratulate Azerbaijan on the event. Minister of foreign affairs Igor Ivanov did it in a rather original way, stating that oil fields in the Caspian region are not sufficient to cover the expenses of such a huge project. Ivanov also sharply accused attempts to exclude Russia from the region, where it has "historical interests".   Another Russian official hinted that the "building of pipeline would not be easy".   Earlier, Russian Prime Minister  Mikhail Kasyanov threatened that Russia would resist efforts to deprive it of a dominating role over regiona energy resources, and could use economic sanctions.

Strange as it may seem, it is not Azerbaijan, the country possessing oil, but Georgia - the transit country - that is suffering under Russian pressure. According to experts, all events related to the Pankisi gorge are related to BTC. In view of such a regional environment, pipeline security is an issue of vital importance. BTC security is planned to be ensured by all available means of the countries through whose territories the pipeline will pass. He noted that member countries of the project are not intending to militarize the pipeline, but necessary measures on securing the pipeline from terrorist acts would be undertaken. In this regard each government must secure the pipeline in the way it considers necessary. For these aims, special subdivisions with mobile forces with special equipment and helicopters, will be established, according to the Head of SOCAR, Natiq Aliyev. Simultaneously, the SOCAR chief mentioned the possibility of using NATO experience in combating terrorism. Regarding technical safety of the pipeline, i.e. preventing oil leak, the pipeline company will be responsible for this.

Thus, BTC will make its contribution to the creation and development of a transport corridor between Europe and Asia and the recreation of the Great Silk Road. The oil pipeline would bring not only Azerbaijan, Georgia and Turkey closer, but also other countries of the Caspian region. In particular, the prospect of Kazakhstan and Turkmenistan joining BTC is paramount in this context.

Gulnara Ismailova

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