Ankara raises estimate of costs for pipeline to Ceyhan

Jun 24, 1999 02:00 AM

Azerbaijan's top oil official said on June 24 that the Turkish government's push to raise the base figure for the cost of constructing a Baku-Ceyhan export pipeline was likely to complicate negotiations on the oil transport project.
Natik Aliyev, the president of the State Oil Company of Azerbaijan (SOCAR), said Baku had not yet figured out why Ankara was now taking the position that it could guarantee costs over the figure of $ 2.7 billion but not over $ 2.4 billion as stated earlier.
Aliyev had said on June 23 that Turkey had backed up its claim with documentary evidence. He also speculated that an increase in equipment costs had forced Ankara to rethink the costs of the project. However, he told on June 24 after meeting U.S. envoy Richard Morningstar that Baku had was still not certain why the Turkish government had upped its price.

The SOCAR chief also complained that the Turkish government had pushed the expected completion date for the pipeline back from 2003 to 2005.
It is extremely unlikely that these shifts in the Turkish position will not have an impact on negotiations between Ankara, Baku and the Azerbaijan International Operating Company (AIOC). The international consortium, which would be the first to use the pipeline and likely the major source of financing for construction, shied away from even appearing to lend approval to the Baku-Ceyhan project until the Turkish government bowed to U.S. pressure to cover all cost overruns above the figure of $ 2.4 billion. And with Ankara's commitment to that figure in doubt, the Turkish-Azerbaijani working group set up to sort out diplomatic and legal issues related to the project may not be able to finish its work by a deadline in July. Morningstar, however, said he did not expect the changes in the Turkish position to have much of an effect on the project. He expressed confidence that the parties involved would be able to reach a compromise and reiterated the U.S. government's commitment to the project. He also said that the new base cost suggested by Turkey was not that much higher than the $ 2.4 billion figure given earlier.
The U.S. envoy had said on June 22, during a visit to Istanbul, that he was sure an agreement on the pipeline project would be signed soon. He did not name a date but remarked that the parties had made great progress as they had not even begun formal negotiations a year ago. Morningstar was accompanied to Istanbul and Baku by John Wolf, who is due to take over as the top U.S. advisor on Caspian energy affairs soon.

Source: NewsBase
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