Caspian pipeline hailed as new ‘Silk Road’

Caspian pipeline hailed as new ‘Silk Road’
By Vincent Boland in Baku

FT
May 25 2005 18:12

A pipeline that will carry oil for the first time from the Caspian sea
to the Mediterranean was opened on Wednesday, marking the emergence of
the Caspian region as a new force in the world’s oil markets.

Hailing the biggest investment in the region since the collapse of
communism, the leaders of Azerbaijan, Georgia and Turkey turned on the
taps of the Baku-Tbilisi-Ceyhan (BTC) pipeline linking the three
countries.

“This is the Silk Road of the 21st century,” said Ahmet Necdet Sezer,
Turkey’s president, at the opening ceremony, held in sweltering heat
at the Sangachal oil and gas terminal about 40km south of Baku.

The $3.2bn (‚¬2.5bn, £1.7bn) pipeline will carry 1m barrels of oil
a day when it is fully operational by the fourth quarter of this year,
and more if, as expected, Kazakhstan joins the project in the near
future.

Lord Browne, chief executive of oil major BP, the biggest shareholder
and investor in the BTC pipeline with a 30.1 per cent stake, said in
an interview that the project was “an important piece of the jigsaw of
the world energy market”.

As well as bringing together the presidents of Azerbaijan, Georgia,
Turkey and Kazakhstan, the opening ceremony also attracted Samuel
Bodman, US energy secretary, an early champion of the project for
geopolitical reasons, including a desire to enhance the independence
of former Soviet republics from Moscow.

The pipeline’s circuitous 1,770km route through some of the most
mountainous territory in the Caucasus bypasses Russia, which dominates
routes to western markets for oil from the Caspian and central Asia.

Russia was a notable absentee. Lukoil, one of the country’s big oil
companies, was an investor in the project but sold its stake to Itochu
of Japan two years ago.

Oil industry analysts said it was significant that Moscow did not try
to block the pipeline, although it often voiced doubts that the
project would be completed.

The pipeline also deepens the isolation of Armenia, which has fought a
war with Azerbaijan and has no diplomatic relations with Turkey.

Ilham Aliyev, the Azeri president, said the pipeline would bring
economic benefits to all participating countries. He also vowed to
restore Azeri sovereignty to the disputed enclave of Nagorno Karabakh,
currently occupied by Armenia.

Some diplomats read this as a hint that some of Azerbaijan’s new-found
oil wealth might be spent on the country’s military.

The opening came more than 10 years after the BTC project was
announced. If it had not been built, Caspian oil would have had to be
shipped through the crowded Bosphorus strait that runs through the
centre of Istanbul. Turkey is pressing for an end to tanker traffic on
the strait, which is still used to ship large amounts of Russian oil.

The Caspian’s oil reserves, though not as vast as initially hoped, are
said to equal those of the North Sea and are expected to supply 25 per
cent of the world’s expected new oil demand over the next few
years. Lord Browne said the region was expected to provide just over 1
per cent of global oil supply by 2008.