Azeri Oil Group Sees No Pipeline Choice Before Summer

TBILISI (Reuters)–The president of the BP Amoco led Azerbaijan International Operating Company said it was unlikely to choose a main export pipeline route for Caspian crude oil exports by mid-year.

But he said the group would take a decision by year-end.

"My personal view is that it’s unlikely that it will be possible to select the route before late summer. Possibly it may slip towards the end of the year–but I think we would be disappointed if it would be delayed beyond that," David Woodward told a news conference in the Georgian capital Tbilisi.

Three routes–Baku to Ceyhan on the Turkish Mediterranean coast–Baku to Supsa on the Georgian coast and Baku to Novorossiisk on Russia’s Black Sea coast–are being considered.

Low oil prices and AIOC’s initial cost estimation for the Baku-Ceyhan route of $4 billion have raised questions over its viability.

Woodward stressed the AIOC figure for the main export pipeline was an estimate.

"We know that the pipeline will cost around $3 billion plus or minus 30 percent," Woodward said.

He said it was possible that the pipeline could be constructed for $2.4 billion–as Turkey’s Botas estimates–but said it could go as high as $4 billion.

He also said low oil prices would also have an impact on the rate of oil development in the Caspian and the need for the pipeline.

"A Main Export Pipeline will certainly be required at some stage. The timing for when it will be required is almost certain to be impacted by the oil price environment," Woodward said.

Former AIOC president Terry Adams–now head of Caspian development for Britain’s Monument Oil and Gas–said recently that many producers believed Caspian projects would be unprofitable below around $12 per barrel.

North Sea Brent crude is now around $10 a barrel.

Members of AIOC are BP Amoco (34.1367 percent); Unocal (10.0489); SOCAR and Lukoil (10.0 percent each); Statoil (8.5633 percent); Exxon (8.0006 percent); Turkish Petroleum (6.75 percent); Pennzoil (4.8175 percent); Itochu (3.9205); Ramco (2.0825 percent); and Delta (1.68 percent).

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