BTC Company formed, first pipeline construction contracts awarded
by Charles Coe
The leader of the Baku-Tbilisi-Ceyhan (BTC) crude pipeline sponsor group, BP, announced in London on August 1 the
formation of BTC Company, the holding that will construct, own and operate the 1,760 km pipeline to carry crude oil
from Azerbaijan and the Caspian region to the Turkish Mediterranean port of Ceyhan. It also announced the awarding of
initial contracts for the construction of the pipeline, total cost of which is estimated at $ 2.9 bn.
"The formation of BTC is an important and necessary step which will enable the owners to enter the full construction phase once the BTC Co Board of Directors has been assured of the completion of the few remaining pre-construction activities," BP said. Project partners were due to sanction the project at the end of July, but this has been delayed by plans for TotalFinaElf to join the consortium.
The BTC owners consist of the companies that have been members of the BTC sponsor group, most of which are members of
the Azerbaijan International Operating Company (AIOC), which is developing Azerbaijan's offshore
Azeri-Chirac-Guneshli (ACG) oilfields.
BTC shareholders are currently BP (38.21 %); the State Oil Company of Azerbaijan (SOCAR, 25 %); Statoil (9.58 %); Unocal (8.9 %); TPAO (7.55 %); ENI (5.00 %); Itochu (3.4 %); and Amerada Hess (2.36 %). In addition, TotalFinaElf has acquired the right to purchase a 5 % interest in BTC. The transaction will be finalized soon, the company said, adding that the president of SOCAR, Natiq Aliyev, is the chairman of BTC Board of Directors and BP is the operator of the project.
The document signing ceremony was witnessed by representatives from each of the BTC host governments of Azerbaijan,
Georgia and Turkey. The 1 mm bpd capacity pipeline will run from the Sangachal oil and gas terminal south of Baku
through Georgia and eastern Turkey to the oil terminal at Ceyhan, which is also used for Iraqi crude exports.
The company also said that the BTC board had decided to award the initial contracts for the construction phase in Azerbaijan and Georgia. Turkey's state-owned pipeline company Botas will continue as the Lump Sum Turnkey contractor for the Turkish section of the pipeline. Pipelay in Azerbaijan will be carried out by Athens-based Consolidated Contractors International, while pipelay in Georgia and facilities in both countries will be carried out by a joint venture between Petrofac of the US and Spie Capag of France.
The tender list was approved in late 2001 by all of the BTC partners and the bid evaluation was carried out by the BP
project team. The contracts have been awarded on a lump sum basis. Meanwhile, Bechtel of the US will continue as the
engineering, procurement and construction management services contractor.
The project remains on schedule to be completed in time for first oil from the Phase 1 development of the Azeri-Guneshli-Guneshli oilfield, which is planned for early 2005, the statement said. BTC also welcomed the presidential decree issued by Azerbaijani President Haydar Aliyev concerning SOCAR'S financial participation in the BTC project.
According to the decree, financing for SOCAR'S 25 % share of the $ 2.9 bn project will be arranged as follows: 70 % -- or around $ 525 mm -- will be financed by attracting credits from foreign financial-banking structures. BP, Statoil and Unocal have agreed to guarantee these debts in return for 2 mm barrels of Azerbaijan's profit oil. Baku's state currency reserves are to contribute $ 118 mm, from total reserves that currently amount to around $ 735 mm.
Meanwhile, the BP-led AIOC consortium announced in late July that early civil works on the Sangachal terminal
expansion project had been completed ahead of schedule. The contract had been awarded to the Turkish-Azerbaijani
joint venture Tekfen-Azfen in January by BP Exploration Caspian Sea Ltd on behalf of the AIOC, the Shah Deniz gas
project consortium and BTC sponsor group.
The Sangachal terminal will be used not only as the gathering point for crude productionfrom the ACG oilfields, but it will also be used to process natural gas produced at the offshore Shah Deniz site before it is exported through the South Caucasus Pipeline, a proposed project that is to be built in parallel with the BTC pipeline as far as the eastern Turkish city of Erzurum.