Baku-Ceyhan to cost more than previous estimates

Jun 04, 2001 02:00 AM

The proposed Baku-Ceyhan pipeline is likely to cost between $ 2.8 bn and $ 2.9 bn to build, or as much as $ 400 mm more than previous estimates, a top executive involved in the project has said. The new estimate came as a result of a basic engineering study that ended on May 15, said David Woodward, a senior executive at BP, the operator of the sponsor group that financed the study.
However, the estimates are preliminary and have a 30 % margin of error, Woodward told an industry conference. "More accurate figures with only a 10 % possible margin of error will be given later, when the companies come up with the cost of equipment." The 1,730 km pipeline would carry oil from Baku through Georgia to the Turkish port of Ceyhan on the Mediterranean Sea, breaking the duopoly on Caspian oil exports held by Russia and Iran.

The US government backs the pipeline as key to ensuring energy security, but oil companies have been slow to commit themselves to spending the money. Still, several have joined BPin forming the Baku-Ceyhan sponsor group, set up to finance engineering studies to determine the economic viability of the proposed pipeline.
Apart from BP, which has a 25.41 stake % of the group, the group includes the State Oil Company of the Azerbaijan Republic with 50 %, Unocal with 7.48 %, Norway's Statoil with 6.37 %, TPAO of Turkey with 5.02 %, Itochu with 2.92 %, Ramco with 1.55 %, and Delta Hess with 1.25 %. In mid-June the sponsor group will move to the next stage of analysis, a detailed engineering study lasting 12 months and costing $ 150 mm, BP said.

Source: Dow Jones via Energy24
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