Baku-Ceyhan pipeline needs to be cheaper to be attractive

Nov 02, 1998 01:00 AM

Turkey has to do more to make commercially attractive its proposal of a pipeline from Azerbaijan to carry the bulk of Caspian oil to world markets, Azeri President Haydar Aliyev said.
"Turkey should do a lot," Aliyev said, regarding the pipeline from Baku through Georgia to Turkey's Mediterranean Ceyhan port, whose cost makes it more expensive than the other two options.
Aliyev said most of the 12 members of the AIOC consortium developing three Caspian oilfields objected to the Baku-Ceyhan pipeline proposal for its large price tag.
He estimated a $ 3.9 billion cost for the 1,730 km pipeline, but Turkish officials put the figure between $ 2.3 bn to $ 2.5 bn, which excluded cost of financing and that of throughput oil.
"Their argument is that Baku-Ceyhan is expensive," Aliyev said. "Turkey wants the construction of Baku-Ceyhan, but at the same time Turkey is not putting up any money for the project."

Aliyev and the presidents of Georgia, Uzbekistan, Kazakhstan and Azerbaijan signeda symbolic declaration in Ankara to give support to the Baku-Ceyhan pipeline project, envisaged to carry up to 60 mm tpy of crude from Caspian and Kazakh fields.
Despite the backing of regional countries, the key decision on feasibility will be taken by a consortium of 12 mostly Western companies -- the Azerbaijan International Operating Consortium (AIOC), which will make its recommendation to Baku in November on the main export route.

Oil company officials have expressed doubts about the commercial viability of the project to construct the pipeline at a time of low oil prices.
"The conditions should be facilitated as much as possible," Aliyev said, adding that the Baku-Ceyhan project would be the only long-lasting solution to transporting Caspian oil reserves.
The United States also backs the pipeline over the other two options -- one through Georgian Supsa port and the other via Novorossiisk port in Russia.
U.S. Energy Secretary Bill Richardson, who signed the declaration as a witness, said Turkey had offered some incentives and easier terms to AIOC companies through tax and investment benefits to make the proposal attractive.

Turkey has been outspoken in its criticism of the two alternative schemes, which would require the use of its narrow waterways for oil to be carried to world markets.
Some analysts have suggested the AIOC might favour an initial route to Supsa on Georgia's Black Sea coast -- a line that could later be extended by a southerly spur to Ceyhan.

Source: not available
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