Turkey Signs Baku Ceyhan Pipeline Deal

ANKARA (Reuter)–Turkey agreed with Shell–Italy’s Eni–US’s Chevron and Unocal to set up a joint venture to build an oil pipeline from the Azeri capital of Baku to Turkey’s Mediterranean port of Ceyhan–Turkish energy minister Recai Kutan said Thursday.

"In order to carry Azeri oil and later Kazakh oil to Western markets–Turkey has agreed with Shell–Eni–Chevron and Unocal to form a partnership to build the Baku-Ceyhan pipeline," Kutan told a news conference.

Kutan said Turkey was in full agreement with the Azeri President Gaidar Aliyev–who visited Ankara last week–on the Baku-Ceyhan pipeline.

Aliyev said his government favored the Baku-Ceyhan option to transport off-shore oil from the Caspian Sea when it comes on full stream by 2010.

The oil will be produced by an international consortium led by British Petroleum and Norway’s Statoil under an $8 billion deal–which also envisages developing the oil fields off Baku.

The consortium–the Azerbaijan International Operation Company–had earlier considered carrying the full output from the Caspian oil through Russia and Black Sea to Western markets.

But it later opted for the trans-Turkey route because the other alternative of using existing lines via Russia and Georgia would not be able to handle the peak output–expected to reach 700,000 to 800,000 barrels per day by 2010.

Kutan said the Baku-Ceyhan pipeline–which officials and analysts have estimated to cost between $2 to $2.5 billion–would also handle output from Kazakhstan. Its capacity will be up to 45 million metric tons a year.

The AIOC will still carry the initial output of 75,000 barrels per day–to be pumped out later this year–through Russian and Georgian outlets and the Black Sea.

Kutan said Turkey will be represented in the joint venture by the state pipeline company Botas–for which the government will give powers to join the pipeline venture.

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