A leap forward for Caspian pipeline builders?

Nov 22, 1999 01:00 AM

by Jennifer DeLay

All in all, things are moving on in the Caspian pipeline scene. Practically all of the players have some reason to rejoice.
Azerbaijan and Turkey -- and future transit country Georgia -- have particular cause for merriment. At long last, a deal on the Baku-Ceyhan oil transport project has been signed. A set of four agreements on construction of the pipeline was finalised in Istanbul on the first day of the November 18-19 summit of the Organisation for Security and Co-operation in Europe (OSCE).
Turkmenistan was also invited to join the party. On November 18, as the Baku-Ceyhan accords were being signed, Azerbaijani, Georgian, Turkmen and Turkish officials initialled a declaration of intent to construct a trans-Caspian gas conduit.
Russian officials have expressed some distress over the fact that the Baku-Ceyhan deal, of which Moscow does not approve, is now finalised while no deal is yet in place for construction of the Goluboi Potok (Blue Stream) across the Black Sea. (Earlier last week, Russian officials had voiced faint hope that Ankara might consent to sign the final agreement on Blue Stream at the OSCE summit.) But they can take comfort in the fact that the Caspian Pipeline Consortium (CPC) began work on the Russian section of the Tengiz-Novorossiysk oil conduit, which will carry massive quantities of Central Asian oil across Russian territory, last Wednesday.
Moreover, the recent announcement that work has begun on an oil pipeline to circumvent Chechnya had to have been greeted with relief in Moscow. The Kremlin has been all but forced to give up its dreams of turning the Baku-Novorossiysk pipeline into a main export pipeline (MEP) for Caspian oil due to repeated clashes with the leadership of the restive Chechen republic. Its ability to transport even minimum amounts of Azerbaijani crude is in doubt due to this year's shutdowns. As such, the prospect of having a bypass available -- even one through troubled Dagestan -- must be a welcome one.
On another front, Tehran appears not at all pleased to see such a big to-do made over pipelines that will not cross Iranian territory. Iranian commentators and government officials issued scathing condemnations of the Baku-Ceyhan and trans-Caspian pipeline accords last week, saying that the U.S. government had manipulated the other parties involved into supporting a pair of white elephants in order to deprive Moscow and Tehran of their fair share of Caspian oil and gas revenues.
U.S. officials, for their part, expressed satisfaction at the signings in Istanbul. President Bill Clinton, for example, said that the pipelines would make the world's energy supplies more secure.
Cheers and jeers aside, however, it should not be forgotten that the pipeline builders still have a lot of work ahead of them. Turkey and Azerbaijan are starting work on Baku-Ceyhan at least a year late, and they have yet to secure a wholehearted expression of commitment to the project from BP-Amoco, the leader of the international consortium that wouldbe the first to use the pipeline. Moreover, the matter of ensuring adequate throughput for the pipeline has yet to be settled. Issues of financing and cost overruns along various stretches of the line may also pose a problem.
Money may also be an issue for PSG International, the consortium set up to build the trans-Caspian pipeline; as of last week, the group had yet to line up financing for its project. Certainly it will prove a problematic subject for Russia's Transneft, which was unable to convince most domestic oil producers of the need to help pay for the bypass pipeline around Chechnya. Meanwhile, there are rumours -- vehemently denied by managers of the CPC -- that work on the Tengiz-Novorossiysk oil pipeline is behind schedule.
To date, none of the groups set up to develop oil and gas transportation networks in the Caspian Sea basin has been able to stick to its original work schedule exactly. Issues of money, politics and diplomacy have confronted the pipeline builders at every turn. So while there is reason for taking due note of the progress made last week, there is also reason for caution. Not one of the parties involved in this scene has yet succeeded in building a high-capacity pipeline for gas or oil And even if all goes well, none of the huge pipelines in the works or under construction will be ready for quite a while.

Source: NewsBase
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