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Weekly economic review

Analysis Materials 14 August 2008 12:03 (UTC +04:00)

Fire on the Baku-Tbilisi-Ceyhan pipeline, which broke down in the Turkish section of the oil pipeline at night of 5 August, was extinguished on 11 August. The operator of the Turkish section of the pipeline, Botas International Limited, expects the place of the fire to get cold. Investigations to study the reasons of the emergency will be carried out after this, and its elimination will begin. The period, necessary for eliminating defects and re-establishing oil transportation via the pipeline, has not been determined yet.

Last week on 5 August in midnight, in 60 km of Turkish road of Arzinjan-Refakhiye, near the village of Yurtbashi, an explosion occurred on the Baku-Tbilisi-Ceyhan pipeline. The fire on one of the bolts on the oil pipeline in the territory of East Turkey became the reason for explosion. Firstly the reason for explosion on BTC was named as terrorist act. Terrorist organization Kurdish Working Party assumed the responsibility for this incident. Organization stated that the explosion was committed by the terrorists.

However, the official media of Turkey denied reports about the terrorist act. PKK, which sustained large losses as a result of the sequential operations carried out by the Turkish Army inside the country and in the north of Iraq, disseminate false information on the acts of terror to raise the spirit of its members. Specialists determined that the explosion occurred due to the technical reasons.

Azerbaijan International Operating Company (BP-operated), which carries out full-scale development of Azeri-Chirag-Guneshli fields in Azerbaijan section of Caspian, reduced production because of the fire on the pipeline. BP does not announce volume of reduction.

The production was lowered because of the termination of export along the Baku-Tbilisi-Ceyhan pipeline and the filling up of reservoirs in Sangachal oil terminal of BP Company.

BP said that export of the oil, produced on Azeri-Chirag-Gyuneshli fields, is currently realized through alternative routes - oil pipelines Baku-Supsa and Baku-Novorossiysk, and also through railway to the Georgian Port of Batumi. All points of delivery are located on the coast of Black Sea.

As a result explosion on the part of the Baku-Tbilisi-Ceyhan pipeline, 12,000 barrels of crude oil burnt. The damage, inflicted by fire, will be calculated after its complete extinguishing. Turkish officials report that repair work will last by August 12 to 14.

The total length of BTC is 1,768km, 443km running through Azerbaijan, 249 - Georgia and 1,706 - Turkey. The construction of the pipeline began in April 2003 and it was made operational on 18 May 2005.

The construction of BTC cost $4bln excluding the expenses incurred to fill the pipeline, financial expenditures and payment of the bank interest rates. The financial credit totaled to $2.6bln.

The shareholders of BTC are BP (30.1%), AzBTC (25%), Chevron (8.90%), StatoilHydro (8.71%), TRAO (6.53%), Eni (5%), Total (5%), Itochu (3.40%), Inpex (2.50%), ConocoPhilips (2.50%) and Hess (2.36%).

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