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First leg of BTC pipeline inaugurated in Azerbaijan

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  • First leg of BTC pipeline inaugurated in Azerbaijan

    Oil & Gas Journal, TX
    May 25 2005

    First leg of BTC pipeline inaugurated in Azerbaijan


    Eric Watkins
    Senior Correspondent

    LOS ANGELES, May 25 -- The first leg of the Baku-Tbilisi-Ceyhan (BTC)
    oil export pipeline was inaugurated May 25 in an official ceremony at
    the head pump station in the Sangachal Terminal near Baku.

    BTC Co. shareholders are BP PLC, 30.1%; AzBTC, 25%; Unocal, 8.9%;
    Statoil, 8.71%; TPAO, 6.53%; Eni and Total, 5% each; Itochu, 3.4%;
    INPEX and ConocoPhillips, 2.5% each; and Amerada Hess, 2.36%.

    The inauguration ceremony follows the commissioning of the BTC head
    pump station at the Sangachal terminal and officially marks the
    commencement of the first line-fill phase (OGJ, May 16, 2005, p. 32).


    A total of 10 million bbl of crude oil is required to fill the
    1,760-km, 34-46-in. pipeline, running from the Sangachal terminal via
    Georgia to the Ceyhan terminal on the Mediterranean coast of Turkey.

    The oil will come largely from the Azeri-Chirag-Gunashli (ACG)
    complex of fields off Azerbaijan in the Caspian Sea. The staged
    filling of the pipeline along its entire route could take more than 6
    months. Loading of the first tanker at Ceyhan is expected in the
    fourth quarter of 2005.

    The project's biggest economic benefits will go to Azerbaijan because
    the pipeline will serve mainly as a conduit for oil from the ACG
    fields. With oil at $25/bbl, the government could earn $50 billion
    over 20 years. Georgia and Turkey are expected to earn about $600
    million and $2.5 billion respectively, mainly from transit fees.

    Kazakhstan also expects to profit from the new pipeline. Officials on
    May 24 signed a long-discussed agreement on transporting Kazakh oil
    through the new pipeline.

    Political questions
    While officials of companies involved in the pipeline and officials
    of countries it crosses hailed the benefits to global oil supply,
    political questions about the BTC line remain.

    The pipeline received strong support from the US as a way to link
    Caspian oil to international markets without transiting Russia or
    Iran.

    Vafa Guluzade, a former foreign affairs adviser to the Azerbaijan
    government, said the 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."

    The pipeline, he told the Associated Press, "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."

    But Mikhail Margelov, chairman of the Russian Federation Council's
    International Affairs Committee, dismissed that view, saying, "In the
    modern world, Moscow approves the development of healthy competition
    and economic partnership among its [Commonwealth of Independent
    States] neighbors and colleagues."

    But he stressed that political uncertainties arise from the fact that
    the pipeline represents a potential security risk.

    "This pipeline is virtually golden, and someone certainly must
    protect it," Margelov told Russia's Interfax news agency. "Russia's
    attitude to proposals made by some politicians that this task should
    actually be delegated to the United States is firmly negative. Russia
    will always be negative about the appearance of any foreign military
    contingents within the boundaries of the CIS."

    Margelov wondered why Russia is not being asked to help protect the
    pipeline.

    "Russia has huge experience of [military] presence in the region. We
    all are partners in the antiterrorist coalition, and it makes
    attempts to use the new pipeline as a pretext for enhancing a foreign
    military presence in the region doubly outrageous," he said.

    Terrorist threat
    The pipeline does represent a potential terrorist target, as noted by
    Azeri authorities who last year reported on possible sabotage
    attempts by militants linked to al-Qaeda. Other potential threats
    could come from Turkey's Kurdish militants and Armenians angry at
    their country's unresolved conflict with Azerbaijan over the disputed
    territory of Nagorno-Karabakh.

    But steps have been taken to ensure the security of the line. BTC
    says the installations are monitored by electronic surveillance and
    company guards, while the armed forces of Azerbaijan, Georgia, and
    Turkey have agreed to joint exercises to coordinate pipeline
    protection.

    The Georgian Defense Ministry reported on May 24 that Azerbaijani,
    Turkish, and Georgian troops will conduct joint exercises in August
    to ensure the security of the pipeline.

    It said the military will be trained to prevent terror attacks, acts
    of sabotage, and environmental catastrophes along the pipeline route.
    In case of sabotage or an environmental catastrophe on the territory
    of one of the transit countries, the military of the other two
    countries would provide assistance.
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