Turkey, Azerbaijan and Georgia sign agreement on pipeline

Nov 18, 1999 01:00 AM

President Clinton said a deal to send Caspian Sea oil to world markets without going through Russia or Iran will help ensure that no country can choke off the global energy supply. As Clinton watched, the leaders of Turkey, Azerbaijan and Georgia signed a series of agreements to build a 1,080-mile oil pipeline from the rich fields of Azerbaijan through Georgia to Turkey's Mediterranean port of Ceyhan. In addition, a gas pipeline will be built from Turkmenistan through Turkey.
"These pipelines will be an insurance policy for the entire world by helping to ensure our energy resources pass through multiple routes instead of a single chokepoint," Clinton said. Most Azerbaijani oil is exported through Russia. Much of the Middle East's oil passes through the narrow Straits of Hormuz, which separates Iran from the Arabian peninsula.
The Clinton administration has pushed hard for a pipeline agreement, which also is aimed at drawing the oil rich region closer to the United States and Europe and reducing Russian influence in the newly independent Central Asian states. "These agreements... are truly historic," Clinton said after the signing in the Ottoman-era Ciragan Palace. "They will advance the prosperity and security of a region critical to the world."
Russia and Iran both had pressed Azerbaijan to agree to deals in which the oil would pass through their territories.
Moscow has backed a pipeline that passes through the Russian south while Iran favoured an oil swap in which Azerbaijani oil would be sold in northern Iran and oil from southern Iran would be sold on Azerbaijan's behalf. The Iranian deal was thought to be the cheapest, but was vehemently opposed by the United States.
The setback for Russia came during a meeting of the Organisation for Security and Co-operation in Europe in which Russia faced sharp criticism for its military campaign against Chechen rebels.
After the signing, negotiations between governments and oil companies over financing will have to begin.

Azerbaijan produces some 100,000 bpd, about one-tenth of the one million barrels per day that would make the project viable, experts say. That is only a small fraction of the world's oil consumption. Saudi Arabia, for example, pumps some 8 mm bpd.
Some experts say it could cost billions of dollars to bring Azerbaijan's oil industry up to the level in which it could pump enough oil to make the project viable. It is not clear, however, how large are the oil reserves in the area.
Officials at BP-Amoco, the main Western oil company working in the region, have said that early estimates of massive oil reserves in the area may have been overstated. But Energy Secretary Bill Richardson was optimistic about the deal.
"We continue to believe that (the pipeline) is commercially viable," he said. "Now, we have a foundation to build on." U.S. officials say the role of the Baku-Ceyhan pipeline could be increased by transporting oil from Kazakhstan to Baku and pumping it through the main pipeline.
A deal for a proposed pipeline that would bring gas from Turkmenistan to Turkey also was signed. Turkmen President Saparmurat Niyazov lauded that deal, saying it will "strengthen the national independence of Turkmenistan" and bring "great economic benefits."

Source: AP
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