Posted on 09/18/2002 7:50:47 AM PDT by Destro
Officials Unveil Azerbaijan Pipeline
Wed Sep 18, 9:53 AM ET
By AIDA SULTANOVA, Associated Press Writer
U.S. Energy Secretary Spencer Abraham ( news - web sites) joined the presidents of Azerbaijan, Georgia and Turkey on Wednesday for what he called "one of the most important energy undertakings" — the start of construction of the Baku-Ceyhan oil pipeline.
The pipeline from Azerbaijan's Sangachal terminal, 25 miles south of the capital Baku, to the Turkish Mediterranean port of Ceyhan, has been under discussion for eight years. When completed, it is expected to reduce dependence on Gulf exporters and Russian pipelines.
Abraham, Azerbaijani President Geidar Aliev, Turkish President Ahmet Necdet Sezer and Georgian President Eduard Shevardnadze, whose territory the pipeline will cross, participated in Wednesday's groundbreaking ceremony.
"This project guarantees peace, security and stability in the region and still further unites three countries and three peoples," Aliev said at the opening ceremony.
The 1,091-mile pipeline, which will be operated by BP, will carry Caspian energy resources — the world's third largest — to a Turkish port en route to Western markets.
It has won strong support from the United States, which is eager to find a more stable energy source outside the sway of the Middle East. Aliev said Wednesday that U.S. help in championing the pipeline had been crucial.
"This project is one of the most important energy undertakings from America's point of view, as well as for this region," Abraham said Tuesday at a meeting with Aliev.
Reading a letter from President Bush ( news - web sites), Abraham said during Wednesday's ceremony that the project would increase the world's energy security and strengthen the sovereignty and independence of the nations involved.
"Although it will be some time before the first barrel of oil flows through this pipeline, it has already made a significant contribution to the future of this region," Bush said in the letter.
Abraham said the project could serve as a model for further endeavors, adding that it opened the door to investment in this impoverished region.
Construction of the pipeline, estimated to cost about $3 billion, is to be completed by early 2004, and the first oil is expected to flow through it a year later. Experts expect about 349 million to 421 million barrels of oil to move through the pipeline every year.
Fuad Akhundov, a spokesman for Aliev's administration, told Russia's Echo of Moscow radio that the pipeline was expected to generate $100 million a year to the regions through which it passes.
Georgian President Shevardnadze, whose small country is heavily dependent on energy from Russia, declared the project to be "Georgia's main achievement in the past 10 years since it declared independence." Georgia is particularly eager for new energy sources given the new low point reached in its relations with Russia.
However, the project has not won unanimous support. The Kremlin has refused to participate and fears the pipeline will sideline Russia from the Western market. Oil from Azerbaijan is now shipped through Russian and Georgian lines.
Russia's biggest oil company, Lukoil, did not join the Baku-Ceyhan consortium.
"We are ready for cooperation but will not put up with the attempts to crowd Russia out of regions in which we have historic interests," Foreign Minister Igor Ivanov said of the pipeline in New York, according to ITAR-Tass news agency.
Some Western oil companies also have their doubts, saying the proposed route is an expensive alternative to shorter routes through Russia or Iran. Analysts say the Baku-Ceyhan path was chosen for strategic and not commercial reasons.
Business ventures launched for strategic and not commercial reasons fail. It will be cost prohibitive to pump oil through this pipeline route once it is built...unless of course the price of crude somehow goes up when the pipeline is ready?
You can bet your bottom dollar that every company doing work on this project, including the pipeline operators, already have enough government guarantees to last them 50 years. The strategic importance of this supply outweighs the cost in delivering it, even if it sits in US Navy supply dumps.
Then it would have been smart for them to own a piece of the only non-Russian route to market. The only non-Russian route would have been Russian, too. Next, we need to start expanding the Mosul to Ceyhan pipeline corridor (is there one? if not, there should be...).
I can't speak to that specifically, but I know that earlier on when they were trying to put the job together it was assumed by the writers I was reading that Russia would have a piece of it. At that time they were trying to overcome Russia's objections, and it was being kicked around that Turkey, the US, Russia, and Azerbaijan would each have a piece. I guess thats not the way it went, in the end...
Namely, French ones, dealing with Iran.
The routes would not be shorter, but longer.
Iran and Russia are oil competitors. They would influence Azxeri export to fit their own whims.
For comparison, the TransAlaska pipeline is half this length, but cost twice as much to build. Can we assume the Baku-Ceyhan pipeline will be at least 48" in diameter and will move as much oil as the TransAlaska pipeline? If so, it will need a dozen or 16 pump stations along the route. The cost of operation will be about the same, needing only a few more personnel, and the cost of construction per mile is about 1/4, cheap. Looks like the pipeline will not be an economic obstacle.
For sure not as profitable as taking Saudi crude, but there was and is profit even after the State of Alaska skimms its share. 90% of the government of Alaska is paid for by Prudhoe Bay and Kenai oil tax revenue. What is left seems to be enough for the oil company to keep operating the facility.
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