BP STATED ON INCREASE OF THE COST OF BTC PIPELINE
The year of 2006 qualifies Azerbaijan not only as a country, which will commission one of the world biggest oil and gas pipelines, but also the nation which ahs been intensively developing all spheres of economy, including the oil industry, for over 10 years. Beyond all statement by different analysts, Azerbaijan does not suffer of Dutch disease and consolidates many spheres simultaneously.
It was resolved to build the Baku-Tbilisi-Ceyhan (BTC) main export oil pipeline sanctioned with the budget of $2.95bn for the export of the bulk oilto be lifted from the Azeri-Chirag-Gunashli (ACG) fields. A ceremony of construction was staged in the Sangachal terminal near Baku on 18 September 2002. Attending the ceremony were the Azerbaijani President Heydar Aliyev, Turkish President Ahmet Nejdet Sezer and Georgian President Eduard Shevardnadze, US Energy Secretary Spancer Abraham and other senior officials.
Today the construction of the BTC is complete and in May it is planned to ship the first tanker with the Azerbaijani oil from the Turkish port of Ceyhan. However, every huge project has definite obstacles in its way of implementation. In 2006 BTC Co pipeline company forecasts increase of expenses for the project on the construction of the Baku-Tbilisi-Ceyhan (BTC)main export oil pipeline from $641m planned in 2005 to $832m, David Woodward, the President of the BP Azerbaijan, an operator of the AIOC, stated to a news conference in Baku on 19 April, Trend reports. BP heads BTC Co.
Increase in the forecast expenses in the project for 2006 was mainly linked with the increase of expenses for fulfillment of the oil pipeline, the lag in the schedule of construction and some commercial issues with contractors.
The President of BP Azerbaijan said that in the first quarter of 2006 capital expenses under the Azeri-Chirag-Gunashli (ACG) project made up $613m against $2552m designed for 2006. Under the BTC project in the first quarter of 2006 the expenses (linefill and construction) reached $247m.
In January to March expenses under the Shah-Deniz project made up $288m against the target of $865m designed for 2006. Thus, in the first quarter of 2006 the general capital expenses under three projects comprised $1,148bn. As of preliminary estimations, the cist of the construction of the Baku-Tbilisi-Ceyhan (BTC) grew 30% as compared to its initial budget set as $2.95bn at the moment of sanctioning. Some $600m is required for fulfilling the pipeline with the technical oil in the volume of 10 million barrels and the repayment of credits. The estimation on the claims by contractor-companies is underway and final budget of the project will be known upon completion of the construction of the pipeline, Woodward underlined.
At present technical oil is being fulfilled the BTC. BTC Co purchases it from partners in the Azeri-Chirag-Gunashli project. By the end of April oil will reach the forth pump station in the territory of Turkey and run to the Ceyhan port after testing. This year oil transportation via the BTC will comprise 300,000 barrels of oil a day in average, while by the end of the year the figure will increase.
Stable interest of oil companies towards Azerbaijan does not dye down not only for many perspective fields, but also for the future continuation of the BTC, which will result in the expansion of its capacity, which will enable to direct oil of many companies. Meanwhile, Azerbaijan and Kazakhstan are currently discussing an interstate agreement on join oil pumping via the BTC. Crude oil will be delivered by tankers from Aktau to Baku, and onwards through the BTC for sale of Kazakh oil from the Turkish port of Ceyhan. The signing of an intergovernmental agreement between the two countries will guarantee the foreign companies active in the Caspian the stable functioning of the Aktau-Baku transport corridor. Kazashagan, the biggest oil field exists in Kazakhstan and some foreign shareholders (the same time partners in BTC Co.) have promised to use the Baku-Ceyhan pipeline. In the initial stage 7.5 million tons of oil will be pumped via oil pipeline a year. In the later stages Kazakhstan is planning up to 20 million tons of crude via the BTC a year. The signing of such agreement wile enable the sides to set up work over the transport agreement, which is not less considerable for potential investors in the creation of the Aktau-Baku corridor. Without a transport agreement the foreign investors will not know the rules of the game, the participation where costs big money. Under Kazakhstans joining to BTC in the territory of this country there will be constructed an infrastructure worth $3bn, including the construction of pipelines, ports and terminals. However, oil production on Kashagan will start not earlier than 2008-2009. By that period Azerbaijan will fulfill the pipeline at the expense of oil to be lifted from the ACG.
According Woodward, at present talks with the Kazakh cargo deliverers participating in the BTC project are underway. The date and volumes of delivery of oil to run via the pipeline is being coordinated. The talks are held with the companies which carry out production in Kazakhstan. If the agreement is achieved, in 2007 oil could be transported via the BTC. However, it will depend on the quality of oil. Oil which will fall short of quality standards of BTC, will not be pumped into the pipeline, he said. There has been established a quality bank and it will be applied on the companies which are already participating in the project.
The BTC pipeline is not accidentally interest in for other countries. This route was selected as the most optimal one, which is suitable for the transportation of not only the Azerbaijan and Kazakh oil. Moreover, Turkmenistan and Russia are also expected to deliver oil via this route. BTC is convenient even for being beyond the difficult Turkish straight Bosphorus (leading to the Mediterranean Sea), where long queues of tankers cost sizable expenses for the company. Running via the BTC oil immediately flows to the Turkish port of Ceyhan in Mediterranean Sea.