Azeri Oil and Gas at Center of Caspian Pipeline Pressures

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Take a dip in the Azerbaijan oil and gas sector and you are sure to feel the pressure in the Caspian pipelines. Delays in the construction of the 1,076 kilometer Turkish section of the Baku-Tiblisi-Ceyhan (BTC) pipeline, due for completion in December 2004/January 2005, have caused the Turkish construction contractor to issue strong denials that the deadline on the $1.4 billion section will be missed.

Botas General Director, Mehmet Bilgic, told a press conference in Baku at the beginning of the second week of June, "At the moment delays are not being discussed. The Turkish government has set Botas the task of completing construction on time and we will do everything possible for this."

The Azerbaijan oil industry and government are keen to the 1,767 kilometer pipeline in operation that will give them an advantage in the jostling for strategic position amongst the Caspian states. The BTC will have a capacity of 50 million tons of oil per annum (around 360 million barrels) and a total cost of $3.6 billion. In addition to the Turkish sector the line will have a 443 kilometre stretch through Azerbaijan and 248 kilometres through Georgia.

At the beginning of June, support for the BTC pipeline came from the U.S. State Department's senior adviser on Caspian basin energy diplomacy, Steven Mann. He said that although the U.S. supported a proposal for Kazakhstan to use the pipeline the project did not depend on this usage as Azerbaijan had enough oil to fill the pipeline, which provided the best route for Caspian oil exports.

This comment was accompanied by a strong statement of U.S. opposition to a proposed trans-Iranian pipeline in which Kazakhstan would be involved. Mann said there were better alternatives in commercial terms.

Continuing to address the Caspian pipeline league table he said that the U.S. supported the Odessa-Brody pipeline as a good way of taking oil to Europe and added that Turkey was also in favour as it was a way to relieve congested shipping traffic through the Bosphorus. Support was also voiced for the Caspian Pipeline consortium and the Kazakhstan-China pipeline projects.

Meanwhile, the state's ZAO Azerigas monopoly is on the lookout for investors for two gas pipelines it plans to build to connect the Sangachaly terminal with the national gas transportation systems.

A feasibility study is being prepared for the 70 kilometer pipes that will have a capacity of 12 billion cubic metres of gas per annum. The pipelines would be built to prepare the Azerbaijani gas transport system for the gas output from the Shah Deniz field. Which holds recoverable reserves of 625 billion cu metres of gas and 101 million metric tons of gas condensate.

Looking ahead, in the pipeline scenario, the AIOC consortium, operator of the Azeri-Chirag-Gunashi project, said that the company would fill the Baku-Supsa line with 140,000 bpd and any oil volumes above this would be sent to the BTC. Increases of available supplies of oil could increase to 200,000bpd but the transportation through the Baku-Supsa line would remain unchanged and increases in volumes carries by BTC would depend on an increase in production at the Azeri field. The BTC pipeline would be completely filled by 2010-2014 and if additional capacity is required capacity could be increases by the use of chemical reagents or mechanical methods, said a spokesman.

The stakeholder profile of the total Caspian pipeline network represents a cavalcade of international oil majors, exploration companies and Azeri and other regional interests with enough cross holdings to make company meetings into a Board game.

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