BP Won’t Pay for Baku Ceyhan Pipeline

LONDON (Itar-Tass–Dow Jones)–One of the world’s largest oil companies–British Petroleum-Amoco announced Wednesday that its output in Azerbaijan’s Caspian offshore fields did not justify the construction of the Baku-Ceyhan pipeline to link this region with Turkey’s Mediterranean ports.

A source at London’s’ International Oil Exchange told Itar-Tass on Wednesday that David Woodword–chief of AIOC–which is an international consortium operating in Azerbaijan’s sector of the Caspian Sea with British Petroleum-Amoco–said that the oil output in the region would not repay the costs of pipeline construction–an estimated 3.5 billion dollars.

The London oil exchange expects the stance of British Petroleum-Amoco to deter the rapid building of Azerbaijan-Turkey oil pipeline–which the United States is actively advocating.

The British Petroleum-Amoco estimates that the store of Azerbaijan’s Caspian oil fields is two times below costs of the pipeline.

The company in February announced that its prospecting operations showed no "big oil" in northern Apsherson–another sector of Azerbaijan’s Caspian Sea.

There is no need for the planned oil pipeline from Azerbaijan to Turkey to begin operations until 2003–given the current production volumes of the Azeri International Operating Company and low world oil prices–the Interfax news agency quoted the AIOC’s president as saying Wednesday.

The Azeri–Chirag–and Gyuneshli offshore fields currently developed by the AIOC contain only about 3 billion barrels of oil–or half of what is needed to make the Baku-Ceyhan pipeline project profitable–AIOC President Woodward said at a press conference in Baku.

The AIOC was unavailable for immediate comment Wednesday.

At the same press conference in Baku–Woodward said good progress has been made with Turkey on the intergovernmental and host government agreemen’s on the pipeline.

The consortium and the Turkish government are discussing a fixed-price for the pipeline–including a completion guarantee by the government.

Speaking to journalists last week in the Turkmen capital Ashgabat–Turkey’s Energy Minister Ziya Aktas said a committee drafting a commercial agreement to build the pipeline would be meeting March 15 to 18.

The US government–which advocates the Baku-Ceyhan route as the best export artery for Azeri oil–has been urging the consortium to squeeze concessions from Ankara–given the low oil prices. The 1,730-kilometer Turkish route is the longest option suggested.

Turkey estimates the cost of the Baku-Ceyhan pipeline at $2.3 billion–while the AIOC has put it at a figure closer to $3.7 billion. Despite its political support for the route–the US government has said it will provide no finance for the project.

Rival plans to the Turkish route include a pipeline to the Russian town of Novorossiisk on the Black Sea coast; and an artery to the Georgian Black Sea port of Supsa–where the AIOC is due to open an oil terminal next month.

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