Baku-Ceyhan pipeline not currently commercially viable
22-10-1998 US oil company executives, and top US government officials recently met and agreed that a key pipeline from Baku in Azerbaijan through Turkey to the Mediterranean port of Ceyhan is not currently commercially viable, though they stressed that it would be built if Caspian oil exports grow sufficiently.
"Baku-Ceyhan makes sense, we all agreed. What we need to do is find ways to make it commercially viable in the shortest possible time," said an official.
The meeting was attended by James Steinberg, deputy director of the National Security Council; Richard Morningstar, secretary of state for Caspian Basin energy diplomacy, and representatives from all the major US oil companies doing business in the Caspian, including Mobil, Amoco, Chevron, Exxon, Unocal, Phillips Petroleum and Pennzoil.
The gathering comes as the Azerbaijan International Oil Co. (AIOC), a consortium of 12 companies led by BP-Amoco, is due to deliver to the Azerbaijan government its recommendation on which should be the maininitial export route from Baku.
Persistently low oil prices over the past year, as well as a series of disappointing exploration wells this year, have led to a downgrade of near-term estimates of export volumes from the Caspian.
Oil industry officials said the administration recognises that the initial focus of investment will be on the route taking oil from Baku to the Georgian Black Sea port of Supsa, the first phase of which is already near completion. They also said there is likely to be investment in the existing northern route to Russia's Black Sea oil port, Novorosiisk.
But the US is still keen to ensure that the Baku-Ceyhan line remains the logical next route if the Caspian's oil promise is fulfilled.
"It's going to take a while, frankly, to find enough oil to fill all those pipelines. We don't know how long that is going to be," the administration official said.
The oil company executives took a similar line.
"There was a great degree of agreement as to the logical pattern of pipelinedevelopment...and that Baku-Ceyhan should be the next logical development. The question was on timing and on financing," said Richard Matzke, head of Chevron Overseas Petroleum.
The US officials were intent on getting across their support for that position and said they would make every effort to make sure the Baku-Ceyhan pipeline is built when commercially viable.
Administration officials repeated that American taxpayer money wouldn't be used to pay for the pipeline, but financing could be supported by the US Export-Import Bank, the Overseas Private Investment Corp. and the US Trade and Development Agency, which announced an $ 823,000 grant to Turkey to help study the pipeline.
The US will also encourage Turkey to make every effort to support the building of the 1,080-mile line, most of which would run across its territory.
