US Official Says Bush Backs Caspian Oil Pipeline

WASHINGTON (Reuters)–The Bush administration supports a proposed pipeline to ship Caspian oil through Turkey to western markets–a top US government energy official said on Wednesday.

The proposed $3 billion pipeline would transport oil about 1,000 miles from the Azerbaijani capital of Baku through Georgia to the Turkish port of Ceyhan on the Mediterranean Sea.

President Bush comes to the Oval Office as a consortium of international oil companies must decide whether to move forward with the next phase of the project and order a $100 million detailed engineering plan for the pipeline by the summer.

Ambassador Elizabeth Jones–Special Advisor to President Bush and Secretary of State Colin Powell on Caspian energy policy–said while administration officials had not held significant discussions about the Baku-Ceyhan pipeline–the project has the backing of the president.

"It’s not a controversial issue," Jones said in a speech at the conservative Nixon Center think tank. "If you look at the strategic goals (of the pipeline)–there isn’t any one of those that the new administration wouldn’t support completely."

Jones said the US government wants the pipeline built to ensure the sovereignty and economic independence of the Caspian states from Russia–develop new reliable sources of energy for the West and support investment for US companies that would build the pipeline.

"All these strategic goals fit very nicely into the thinking of the new administration and how they look and should conduct American foreign policy in the (Caspian) region," Jones said.

However–Jones said the pipeline would not be built unless oil companies determined the project profitable–which she believes the firms have already concluded is the case–as they have spent about $26 million on an initial engineering study.

They (oil firms) think it’s commercially viable from everything they know now," she said. "It’s not going to happen because it makes political sense for the United States. It will happen if it is determined that there is money to be made there by commercial companies."

Jones said international oil companies will decide in May or June whether to spend about $100 million to conduct a more detailed 12-month engineering study on such items as where pumps would be placed on the pipeline and where thicker steel would be required along the pipeline.

"The minute you spend $100 million on detailed engineering–you’re basically in it," she said–referring the to oil firms’ commitment to build the pipeline.

Another important step for the project will occur in late February–Jones said–when government officials from the pipeline’s current host countries — Azerbaijan–Georgia and Turkey — will meet with Kazakhstani officials to reach a formal agreement for Kazakh oil to be transported through the pipeline. Jones said she will take part in those negotiations. v"That will result–we hope–in an inter-governmental agreement," she said.

A separate commercial framework – such as shipping tariffs and port fees — also has to be work out between the Kazakh government and energy companies for Kazakh oil producers to ship through Baku–Jones said.

Separately–Jones said she has begun talks with European Union officials about obtaining natural gas from the Caspian region. "There is new interest in talking about Caspian gas," she said.

Jones said Russia would likely remain the dominant supplier of natural gas to Europe–but she pointed out that demand for gas in the region will continue to rise.

"It might be appropriate to have an alternative source of energy for Europe–i.e. from the Caspian," she said.

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