Baku-Ceyhan's final signatures now provide green light

The Azerbaijan host government agreement for the Baku-Tbilisi-Ceyhan oil pipeline project was signed, providing the green light for a massive project that will deliver 1 mm bpd or more of Caspian oil to the world market. Today's Azerbaijani agreement was the final phase of the puzzle in a long process intended to create a legal, commercial, and regulatory foundation for the Baku-Tbilisi-Ceyhan project.
The pipeline will bring oil from Azerbaijan and the Eastern Caspian to the Turkish Mediterranean Sea port of Ceyhan via Georgian territory. Completion of the pipeline is expected by 2004-2005. The agreement, signed by representatives of Turkey, Azerbaijan, and Georgia -- including Turkish President Suleiman Demirel -- promises to open a new era for energy development in the Caspian region.
A "sponsor's group" made up of relevant governments, oil companies, and financial institutions will now be formed to put together financing for the project. "I am announcing that no more signatures are necessary," declared President Demirel. "These are the final signatures."

The signing took place at the third annual "Tale of Three Seas" energy conference which focuses on energy investment in the Caspian Sea, Black Sea, and eastern Mediterranean regions -- sponsored by Cambridge Energy Research Associates (CERA), the Black Sea Economic Cooperation Business Council (BSEC BC), and Turkey's Foreign Economic Relations Board (DEIK).
"This is a historic event for the world energy industry and one that opens a new chapter for the world oil industry," said Daniel Yergin, chairman of CERA and co-chairman of the "Tale of Three Seas" conference, at the signing. "It provides the commercial framework for Caspian development to go big time."
"This pipeline will connect Caspian oil resources to the global market, delivering a major new resource for consumers around the world," said Laurent Ruseckas, CERA Associate Director for Caspian Research. "The agreement should provide a solid legal and commercial foundation to attract private financing.
"One of the toughest details, and one of the most important aspects of the agreement," continued Ruseckas, "is the establishment of very reasonable tariff rates that will help make Caspian oil highly competitive in terms of price, and thus will encourage more rapid development of new resources in the region. The next big challenge will be to achieve throughput commitments and work out the actual details of the financing package."
"At the beginning of the twentieth century, the world's number one source for oil was Baku, the capital of Azerbaijan, and the oil province that today we call the Caspian. This agreement marks a major step that will ensure that the Caspian will be one of the world's most significant energy sources for the twenty-first century," concluded Yergin, the author of The Prize, the Pulitzer-prize winning history of the world oil industry.