Cost of Baku-Ceyhan pipeline may be higher than expected
David Woodward, president of the Azerbaijan International Operating Company (AIOC) and head of BP-Amoco's Azerbaijan
unit, said on June 4 that the cost of constructing a Baku-Tbilisi-Ceyhan (BTC) oil export pipeline might be higher
than expected.
Previously, he noted, the companies involved in the oil transport project had figured the cost of the pipeline at $
2.4-2.7 bn. However, a basic engineering study completed last month indicates that the price tag is likely to reach $
2.8-2.9 bn, he said. The latter figure is more in line with industry analysts' predictions that the Baku-Ceyhan
pipeline would cost at least $ 3 bn and perhaps as much as $ 3.5 bn or more.
Woodward stressed, however, that it was too early to make definitive statements about the cost of the BTC project.
The figures in the basic engineering study are preliminary and bear a 30 % margin of error, he stated. Once the
partners in the project submit information on the expected cost of equipment, he said, it will become possible for
the Main Export Pipeline Company (MEPCO) to estimate construction costs more precisely, with only a 10 % margin of
error.
BP-Amoco noted that the sponsor group was due to meet in June to approve plans for a detailed engineering study of
the BTC pipeline route. It will take about 12 months and $ 150 mm to complete this study, the company said.
BP-Amoco is the operator of the AIOC consortium, which would be the first to use the BTC pipeline, and the second
largest shareholder in MEPCO, which was set up to build the pipeline. Equity in MEPCO is currently split as follows:
the State Oil Company of Azerbaijan (SOCAR) holds 50 %; BP-Amoco holds 25.41 %; Delta Hess and Unocal of the United
States hold 1.25 % and 7.48 %, respectively; Statoil of Norway holds 6.37 %; Turkish Petroleum (TPAO) holds 5.02 %;
and Itochu of Japan holds 2.92 %. Ramco Energy of Great Britain, which has sold its interest in the AIOC to Amerada
Hess, Devon Energy and Unocal, holds the remaining 1.55 %.
Other major international companies have expressed interest in joining the pipeline group. SOCAR's President Natik Aliyev said that negotiations had begun with three companies -- Chevron (US), Alberta Energy (Canada) and TotalFinaElf (France).
