Agence France Presse — English
May 25, 2005 Wednesday 8:22 AM GMT

US-backed BTC pipeline fruit of “deal of the century”

BAKU

The Baku-Tbilisi-Ceyhan (BTC) pipeline launched here Wednesday is a
four-billion-dollar US-backed oil transport route stretching 1,770
kilometers (1,094 miles) from the Caspian Sea to the Mediterranean
Sea, tackling an altitude of 2,800 meters (8,400 feet) at its highest
point.

Built with financial support from the United States, the pipeline was
initiated in 1994 under the late Azeri president, Heydar Aliyev, as
part of Azerbaijan’s so-called “deal of the century” — a massive oil
contract signed in the early 1990s to develop Caspian Sea oil.

Azerbaijan was Russia’s main source of fuel during the World War II
years, but the massive 1994 contract opened the country’s
considerable oil reserves to the outside world with 33 foreign oil
companies operating here today.

British energy giant BP holds a leading 30 percent stake in the
consortium running the pipeline. Other consortium members include
Azerbaijan’s state oil company SOCAR, Amerada Hess, ConocoPhillips,
Eni, Inpex, Itochu, Statoil, Total, TPAO and Unocal.

Some argue the project has more geopolitical significance than
economic importance. The pipeline gives Caspian oil producers
independent export routes sidelining traditional paths through Russia
without increasing world oil supplies substantially.

The project was 70 percent financed by US and Japanese government
banks, the World Bank and the European Bank for Reconstruction and
Development, while 30 percent of the funds came from the consortium
members themselves.

The pipeline is to ship one million barrels of Caspian oil daily,
roughly one percent of global oil production, once it is fully up and
running by the end of the year.

Annual delivery will equal one million barrels per day, or 50 million
tonnes of oil, compared with daily global consumption which is
expected to hit an average 84 million barrels per day this year.

The oil will travel at two meters per second thanks to eight pumping
stations along the route of the pipeline, whose capacities could be
expanded with additional investment.

Avoiding a shorter path through Armenia, which is in a state of war
with Azerbaijan and under economic blockade from Turkey, the pipeline
lies across 445 kilometers of Azerbaijan, 245 kilometers of Georgia
and 1,070 kilometers of Turkey.

The pipeline’s path straddles three unstable separatist regions in
Azerbaijan and Georgia making security, which is handled by each
participating country with assistance from the United States, a top
priority.

There is a proposal to extend the pipeline to Kazakhstan’s Caspian
port of Aktau, a plan Kazakhstan’s President Nursultan Nazarbayev
appeared to endorse on Tuesday

The “South Caucasus Project,” a gas pipeline traveling parallel to
the BTC, is currently under construction and is expected to be opened
in 2006. It diverges to the Turkish city of Erzerum where it will
join the existing European gas network.

BP estimates the BTC will bring Azerbaijan 100 billion dollars of oil
revenues over the next 30 years, on the basis of an average oil price
of 30 dollars per barrel.

From: Emil Lazarian | Ararat NewsPress