GIOC and Rosneftegazstroi to build pipeline for Caspian oil

The Georgian International Oil Corporation (GIOC) announced on May 27 that it planned to work with Rosneftegazstroi, a Russian company, to build a pipeline for Caspian oil on the coast of the Black Sea. The two companies have agreed to set up a joint venture to carry out the project.
The joint venture will be known as Gruzrosneftegazstroi. Some reports said that Gruzrosneftegazstroi hoped to build a pipeline from Novorossiisk, Russia's main export terminal on the Black Sea, to the Turkish Mediterranean port of Ceyhan by way of Supsa, a terminal on the Georgian Black Sea coast. Other agencies reported, though, that the pipeline would only go from Novorossiisk to Supsa.

The Russian government has said that Novorossiisk-Supsa-Ceyhan would be a better route for Caspian oil exports than the planned Baku-Tbilisi-Ceyhan (BTC) pipeline, which is to be built by a group of international oil companies headed by BP. Kremlin officials also say that the pipeline might generate $ 600 mm worth of revenues for the Russian government each year.
Work on the project has been slow to begin, though, because of security concerns. A Novorossiisk-Supsa-Ceyhan or Novorossiisk-Supsa pipeline would have to pass through the breakaway republic of Abkhazia, which declared independence from Georgia a decade ago.

The Russian government believes that this route would prove less expensive than the BTC pipeline. However, the BTC project -- unlike the Gruzrosneftegazstroi venture -- does have the backing of the US government and a number of major international oil companies.
Moscow may also have to confront the issue of Caspian oil producers' willingness to use Russian pipelines. Azerbaijan, for example, has sharply reduced use of the Baku-Novorossiisk export pipeline in recent years, due in part to the Russian state oil pipeline operator Transneft's practice of mixing sour Urals crude with lighter Caspian crude. Officials in Baku say that Azerbaijan has lost millions of dollars because of Transneft's practice of reducing the quality the Caspian crude.