CNN News
May 25 2005
$3bn Caspian oil pipeline opens
Wednesday, May 25, 2005 Posted: 1834 GMT (0234 HKT)
SANGACHAL, Azerbaijan (AP) — With speeches and a letter from U.S.
President George W. Bush, officials have opened the first section of
a 1,100-mile pipeline that will carry Caspian Sea oil to Western
markets, a project seen as an economic and political boon for the
troubled Caucasus region.
The $3.2 billion U.S.-backed project also realizes several crucial
goals for Washington, including reducing dependence on Middle Eastern
oil and the need to use Russian pipelines to ship oil westward.
The presidents of Azerbaijan, Kazakhstan, Georgia and Turkey were on
hand for the ceremony at the Sangachal oil terminal, about 25 miles
south of Azerbaijan’s capital, Baku.
Beginning in Azerbaijan — a mostly Muslim country and a U.S. ally in
the war on terrorism with troops in Iraq — the underground pipeline
passes through Georgia and Turkey, ending at the Mediterranean port
of Ceyhan. It avoids going through Russia, Armenia, Iran, Iraq and
Syria on its way to the Mediterranean.
It passes within a few miles of Nagorno-Karabakh — an enclave that
ethnic Armenian separatists took control of more than a decade ago.
The conflict continues to simmer, undermining the region’s security,
and critics of the pipeline have suggested it could be vulnerable to
terrorist attacks at various points.
The pipeline’s route through Georgia avoids the two separatist
regions in the north of that country, but does traverse areas where
security is fragile. Some of its stretch in Turkey goes through
conflict-prone Kurdish areas.
The Baku-Tbilisi-Ceyhan pipeline, with a capacity of 1 million
barrels per day, “will take new supplies of oil to the world market
and will help to demonstrate that security is best achieved by having
multiple sources of supply and trade routes,” BP PLC Chief Executive
John Brown, whose company leads the consortium that built the
pipeline, said at the ceremony.
It is the first direct oil link between the landlocked Caspian, which
is thought to contain the world’s third-largest oil and gas reserves,
to the Mediterranean.
The pipeline “opens a new era in the Caspian Basin’s development,”
Bush said in a letter read by Energy Secretary Samuel Bodman. Bush,
whose administration is seeking to diversify energy sources, called
it a “monumental achievement.”
“The United States has consistently supported (the pipeline) because
we believe in the project’s ability to bolster energy security,
strengthen participating countries’ energy diversity, enhance
regional cooperation and expand international investment
opportunities,” Bush’s letter said.
Azerbaijan, Georgia and Turkey look to earn substantial revenue from
the pipeline, through transit fees and royalties.
Azerbaijan is banking on the pipeline to raise its profile in the
world and it increased security ahead of its inauguration. On
Saturday, police broke up a banned demonstration by protesters
demanding free elections and arrested demonstrators, with the
government citing safety concerns ahead of the pipeline’s opening.
Tensions between the government and the opposition in the tightly
controlled former Soviet republic has increased since an October 2003
election in which Ilham Aliev replaced his late father, Geidar Aliev,
as president in a vote the opposition said was marred by fraud.
“This pipeline first of all will help solve economic and social
problems, but the role of the pipeline in strengthening peace and
security in the region also is not small,” Aliev said at the
ceremony.
Turkish President Ahmet Necdet Sezer said the pipeline “can be called
the Silk Road of the 21st century.”
Georgia President Mikhail Saakashvili said the pipeline should help
attract investment and improve living standards. Saakashvili has
sought to lessen Russia’s influence on his impoverished country,
which depends heavily on Moscow for energy.
Kazakhstan President Nursultan Nazarbayev was on hand because oil
from his country will also be transported through the pipeline.
Officials said it would take up to six weeks to fill the Azerbaijani
section with oil. The Georgian part will be ready after that, 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 Tuesday that deliveries of oil from the
pipeline to tankers at the terminal in Turkey are to begin in the
fall.
Once fully operational, the pipeline will represent a “significant”
addition to Western oil supplies, said analyst Jason Kenney of ING
Financial Markets, although the time needed to fill it means “you
won’t see exports until the later part of the year.”