Inauguration of Baku-Ceyhan pipeline to also start new economic prospects in
Caspian region
AP Worldstream
May 24, 2005
AIDA SULTANOVA
The 1,760-kilometer (1,100-mile) Baku-Ceyhan pipeline to be
inaugurated Wednesday will not only bring Caspian oil to the West but
could help bring stability to a troubled region, analysts say.
The US$3.2 billion (Aâ=82¬2.5 billion) U.S.-backed project is the
firstdirect pipeline link between the landlocked Caspian, which is
thought to contain the world’s third-largest oil and gas reserves, and
the Mediterranean _ providing a much-needed alternative to Mideast
energy sources and Russian transit routes.
“This global project will completely change the economic situation in
Azerbaijan, and in the political sense it will influence the rest of
the Caucasus and Central Asia,” said Vafa Guluzade, a former foreign
affairs adviser to the Azerbaijani government.
Built by a consortium led by BP PLC, the route travels from Azerbaijan
through Georgia to the Turkish port of Ceyhan.
Until now, Caspian states sent almost all their oil through Russian
pipelines to reach world markets. The new route will neutralize any
Russian attempts to use economic levers to bring former Soviet
republics back under its wing, Guluzade said.
“(The pipeline) will carry a huge volume of oil, and Russia is nervous
that it is being deprived of big money and also the possibility to
dictate its terms to these states,” he said.
Azerbaijan will earn taxes and royalties on the oil that transits its
territory, while Georgia and Turkey are to profit from transit fees.
The presidents of Azerbaijan, Kazakhstan, Georgia and Turkey are to be
on hand _ along with U.S. Energy Secretary Samuel Bodman and a coterie
of oil executives _ to watch Azerbaijani President Ilham Aliev open
the taps Wednesday for the first symbolic drops of oil to enter the
pipeline at the Sangachal oil terminal, about 40 kilometers (25 miles)
south of the Azerbaijani capital, Baku.
Aliev and Kazakh President Nursultan Nazarbayev were to sign an
agreement on transporting Kazakh oil through the new pipeline on
Tuesday.
“We view this as a significant step forward in the energy security of
that region,” Bodman said Tuesday in Moscow.
The president of the pipeline consortium, Natik Aliev, said it would
take up to a month and a half to fill the Azerbaijani section of the
pipeline. The Georgian part will be ready after that, and then the
Turkish stretch, which Turkish authorities have said should be filled
by Aug. 15. It will take approximately 10 million barrels of crude to
fill the entire pipeline.
Bodman said that it would take three or four months to fill the
pipeline and that deliveries would begin in the fall.
“This is a contribution toward … an increase supply in oil in the
world,” he said. “It adds a new supplier of some consequence.”
But experts have said the new oil will provide only short-term relief
to a world that is consuming more crude every year. Oil prices, while
down off their recent highs, are still hovering around US$49 a barrel.
Four years ago, oil officials spoke of finds that could rival the
Middle East’s production. But experts now say the Caspian should in
coming years pump some 4 million to 5 million barrels per day, on par
with Iran.
Eshan Ul-Haq, chief analyst at PVM Oil Associates in Vienna, said the
pipeline will have an impact but only for Europe, because initial
volumes will be low.
He also said the pipeline’s oil could bring prices down for sour-grade
crude such as those produced by Iraq and Saudi Arabia, and it could
mean lower prices for Russian Ural oil. The oil most in demand is
light, sweet crude, which most refiners prefer it because it is low in
sulfur and easy to process.
Azerbaijan, meanwhile, is banking on the pipeline to raise its profile
in the world and swing international support behind Baku in its
dispute with Armenia over the Nagorno-Karabakh enclave, which ethnic
Armenian separatists took control of more than a decade ago. The
conflict continues to simmer, undermining the region’s security.
“(The pipeline) will bring a certain element of stability in terms of
cooperation … with large states that are interested in pressuring
both … Armenia and Azerbaijan to resolve the Karabakh conflict as
quickly as possible,” said analyst Rasim Musabekov.