The Iranian


email us

US Transcom
US Transcom

Sehaty Foreign Exchange

    News & views

Pipeline Flap May Clog Expansion in Caspian Sea
U.S. Still Insisting On Route to Skirt Iran and Russia

By James M. Dorsey
Special to the Wall Street Journal
August 11, 1999

BAKU, Azerbaijan -- The main international oil consortium operating offshore in the Caspian Sea is threatening to delay the expansion of its bellwether project in Azerbaijan, angered by an argument with the U.S., Turkey and Azerbaijan over proposed export pipeline routes for the oil that would be produced.

The Azerbaijan International Operating Co., an 11-member oil consortium led by BP Amoco Corp., wants to expand its small existing line to Georgia's Black Sea terminal at Supsa. That has set the U.S. and others scrambling to protect a bigger, longer and more expensive pipeline plan, which would send the oil to Ceyhan on Turkey's Mediterranean coast.

This route is designed to prevent Russia or Iran from gaining control of the flow of Caspian Sea oil to world markets. It also lessens the risk of increased tanker traffic posing environmental threats to Istanbul, Turkey, and the Turkish Straits.

AIOC President David Woodward said the dispute could result in the consortium delaying a decision due in September on a $3.1 billion expansion of its three Azerbaijani offshore oil fields in the Caspian Sea. The "Phase One" investment, delayed for a year by low oil prices, would boost production to 300,000 barrels from 100,000 barrels a day by 2003.

Mr. Woodward said the U.S.-favored pipeline won't be completed before 2003 at the earliest, and said an expanded BakuSupsa pipeline could serve as a first phase of a future Baku-Ceyhan pipeline.

"Expansion of Baku-Supsa would allow us to move ahead with Phase One development in the interest of Azerbaijan and our shareholders and satisfy various parties that believe that there should ultimately be a Baku-Ceyhan pipeline," he said.

John Wolf, the U.S. ambassador to the Caspian Basin, said expansion of the BakuSupsa pipeline could be discussed if it were to be part of a line from Baku to Ceyhan.

Transit country Georgia also backs this position, Mr. Woodward says. But the U.S. fears that any expansion of Baku-Supsa will undermine chances of building a new pipeline to Turkey, and crush hopes of making Turkey the major conduit for the export of Caspian Sea oil.

A U.S. official said, "We don't think that AIOC has explored options for producers on both sides of the Caspian . AIOC has been notably lackluster with others [around the Caspian ] prepared to develop a main export pipeline."

Some U.S. members of the AIOC are upset about having to pay the commercial cost of political priorities.

But the consortium doesn't present a united front. Azerbaijan and Turkey, whose state oil companies are part of the consortium, both favor the U.S. proposal for a pipeline to Ceyhan to pump AIOC and other Caspian oil.

The AIOC says the Ceyhan line would cost $3.7 billion, and that oil production in the Caspian region is too low to justify the one-million-barrel-a-day line.

A Turkish proposal to guarantee completion of the pipeline for $2.4 billion to $2.7 billion is being negotiated.


Copyright ©Abadan Publishing Co. All Rights Reserved. May not be duplicated or distributed in any form

 MIS Internet Services

Web Site Design by
Multimedia Internet Services, Inc

 GPG Internet server

Internet server by
Global Publishing Group.