Magnitude of crude oil may restore Azerbaijan's economy

Sep 12, 2001 02:00 AM

On a deserted road tracing the edge of the Caspian Sea, a cow wanders lazily past a dust-blown cluster of white storage tanks and a prefabricated office building. It does not look like much now, but this place is soon to become the hub for one of the biggest oil production projects anywhere on the planet.
After six years of exploration and preparation, Azerbaijan is ready to start exporting crude in volumes which will restore the country to the ranks of the world's major oil producers. "What we are embarking on is of a different order of magnitude to what we've been doing for the past few years," said Steve Lawrence, a spokesman for AIOC, the international consortium running the project.
The consortium signed a deal with the Azeri government under which it will invest $ 3.4 bn between now and 2005 to move oil production up a gear. Where now it pumps 120,000 bpd from offshore fields to the terminal at Sangachal, this will rise to 375,000 bpd by 2005, and could reach a peak of 1 mm bpd by about 2009.

At the same time, work will start soon on a $ 2.7 bn, 1,743 km (1,083 mile) pipeline to take the crude from Sangachal to the Turkish Mediterranean port of Ceyhan. Big-volume oil production -- and the money and Western oilmen that go with it -- is already making itself felt in the Azeri capital, Baku.
"We've been here three and a half years now, and until about nine months ago, people were just disappearing from Baku," said Ian Drage, owner of O'Malley's bar and restaurant, a favourite expatriate hangout. "Now we are in a situation where the expat population is increasing daily. Every day we are seeing new faces come in here and all the flights are fully booked, which is good news."
Svetlana Pulatova, business manager with Gateways, a real estate firm which works with many of the Western oil companies, said she is already noticing an upturn in the housing market. "Six months ago supply outstripped demand," she said. "But now we are already noticing a shortage of real estate... We are expecting a second boom in the Baku real estate market."

In the oil industry itself, 3,000 new jobs are to be created for local workers building new rigs, drilling new wells and laying pipeline from the offshore wells to the onshore terminal. At sleepy Sangachal, new tanks will be built to accommodate an extra 1 mm barrels of crude and gargantuan pumping equipment fitted to send the crude on its way to Turkey.
In addition to the development of oil production, building work on the Azeri end of the pipeline to Turkey is scheduled to start next summer, bringing further investment and jobs. Meanwhile the Azeri budget stands to benefit from the project to the tune of $ 16 bn between now and 2005, according to estimates from government officials.
Azerbaijan, on the western shores of the Caspian Sea, is not virgin territory for oil exploration. By the start of the 20th century, the country was supplying half of the world's oil needs. Industrialists like the Nobel brothers and the Rothschild family made fortunes out of Azeri oil and left their mark, building neo-Gothic mansions which still line Baku's promenade.

There was another oil boom from 1994, when foreign companies arrived to exploit the oil reserves that had been neglected under Soviet rule. Many of them packed their bags and left when the oil price fell in 1997 and since then still more have cut back their presence because of disappointing drilling results from other fields in the Azeri sector of the Caspian.
Baku's hard-bitten oilmen have therefore seen too many oil booms come and go to talk of another one on the way. But with AIOC's three offshore fields holding an estimated 620 mm tons of recoverable oil -- roughly comparable to the North Sea reserves -- there is no doubting the importance of the project.
"This is a massive world class undertaking," said AIOC president David Woodward, "in terms of investment, the jobs that will be created, the... oil revenues that will be generated and the impact we hope the project will have on the nation's economy."

Source: AFP
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