Georgian border breached by pipeline

Dec 16, 1998 01:00 AM

Caspian early oil has started flowing down a newly refurbished pipeline linking the Azeri capital of Baku with the Georgian Black Sea port of Supsa.
John Hollis, vice president of the Azerbaijan International Operating Company, said that first oil into the Baku-Supsa pipeline was "a very significant and rewarding milestone, which puts us on track to deliver oil across the Georgian border by the end of this year and allow the first tanker loading from Supsa in April, 1999."
Azerbaijan International Operating Company is the 11-company consortium - led by BP-Amoco - which is developing Azeri oil and gas resources.
The completion of the pipeline's refurbishment comes at a time when there are increasing uncertainties over the future development of Caspian and Central Asian energy reserves.

Meeting in Baku recently were representatives from the Turkish, Georgian and Azeri governments who are pushing for the AIOC to invest in an alternative 1,240 mile new pipeline from the Azeri capital to the Turkish Mediterranean port of Ceyhan.
This rival route is facing difficulties as the AIOC is unnerved by its high cost - estimated at $ 3.8 bn - at a time when oil prices are plummeting and when doubts are being raised as to the true size of the Caspian's reserves.
However, the Turkish administration is claiming that "misleading" information on the cost of the project is being put out by BP-Amoco, who control around one-third of the AIOC's shares.

In an effort to make the pipeline more attractive, Ankara has followed a two-pronged strategy of trying to sweeten costs on the one hand, while also attacking the alternative routes as equally pricey or environmentally dangerous.
From Supsa or the Russian Black Sea port of Novorossiysk - which already receives oil from Baku via a line through Chechnya - tankers are to take the oil to world markets. These will either have to transit the Turkish Straits - the Bosporus and Dardanelles - or bypass them by being unloaded again at Constantza or Varna before being piped across the Balkans to reloading ports on the Adriatic.
"We don't have any fear of bypass routes," says Turkish Energy Ministry under-secretary Yurdakul Yigitguden. "If you compare Baku-Ceyhan with Baku-Supsa, and a transit line to Genoa, the cost would be enormous."

As for the straits, the pre-war Treaty of Montreaux governing their use denies Turkey any direct control over passage.
However, "Turkey has produced a series of by-laws on the straits," says Istanbul Bilgi University oil expert Iltar Turan. "But these exceeded Turkey's authority under the Montreaux convention. Some modifications have been asked for and will probably be made. Turkey also wants to impress upon people that it is serious on the environmental issue."
Currently, due to the difficulty of manoeuvring in the narrow Bosporus or Dardanelles, any vessel of more than 100,000 tons passing through leads to the straits' closure to other shipping. The passage of very large tankers would thus be highly disruptive to other users.
Turkey also recommends that ships carry pilots, but again, cannot enforce this under the convention, despite the fact that there is no proper radar system for the straits - though Turkey is currently establishing one.

Safety issues of this kind may be unlikely to impress the AIOC. In addition, the Exxon-Mobil merger is thought to be bad for the Turkish cause, as Mobil has interests other than Baku-Ceyhan. Exxon, another AIOC member, has never been keen on the proposed route either.
Nonetheless, political pressure on the consortium from regional governments and from the US is likely to prevent them from abandoning the Baku-Ceyhan route altogether.

Source: Lloyd's list
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