Azeris Kazakhs Agree to Caspian Pipeline Deal

ALMATY (Reuter)–Kazakhstan and Azerbaijan agreed Tuesday to build an oil pipeline across the Caspian Sea–eventually reaching Turkey and allowing them to sell their crude on international markets.

"There must be a direct oil pipeline which will lead to Turkey’s Mediterranean or Black Sea coasts–any way suits us," Kazakh President Nursulatan Nazarbayev told a news briefing.

"The plan is…to lay a pipeline on the Caspian Sea shelf in the direction of Baku," he said.

Nazarbayev and his Azeri counterpart Gaidar Aliyev spoke to the press in the Kazakh capital Almaty after signing a memorandum on cooperation in transporting their rich oil reserves to international markets.

Nazarbayev said he and Aliyev had agreed Kazakhstan would eventually deliver to Azerbaijan up to 10 million metric tons of its crude a year by tanker. The oil would be then transported to Mediterranean or Black Sea ports across the Caucasus.

"But this (amount) is still little because Kazakhstan wants to be a large oil producer," he added.

Kazakhstan–the resource-rich Central Asian state five times the size of France and with a population of just 16.7 million people–nurtures an ambition to produce 170 million metric tons of crude a year (3.4 million barrels per day) by 2010 to become the world’s sixth largest oil producer.

But these plans could be thwarted by Kazakhstan’s geographical position. The Caspian provides one possible outlet for Kazakh oil–but it then has to be carried across the Caucasus region to the Black Sea. Foreigners have so far invested over $2 billion in Kazakhstan’s oil and gas sector and made investment commitmen’s worth tens of billions.

"By signing we…give a signal to the world’s investors that probably this pipeline will transport large amounts of oil," said Nazarbayev–but he declined to name the likely start-up date of the project.

"The construction is being launched before the year 2000 and must be finished by the year 2003," Nurlan Balgimbayev–head of the state oil company Kazakh Oil–told reporters after the briefing.

Balgimbayev said the pipeline–more than 1,560 miles in length–would run from western Kazakhstan southwards to Turkmen’stan’s Caspian Sea port of Turkmenbashi and then to Azerbaijan across the sea.

The pipeline would then cross Georgia and Turkey and lead into Turkey’s Mediterranean or Black Sea ports.

He said with time the pipeline would enable Kazakhstan to transport 45-50 million metric tons of oil a year (0.9-1.0 million barrels per day). Azerbaijan would transport 30-40 million (600-800,000 barrels per day)–and Turkmen’stan 5-10 million metric tons (100-200,000 barrels per day).

Kazakh Energy and Natural Resources Minister Viktor Khrapunov told Reuters that the cost of the project would total $2.5 billion–and its initial capacity would be 10 million metric tons a year (200,000 barrels per day).

Two other major pipeline projects signed recently signal Kazakhstan’s success in attracting billions of dollars needed for new oil transport infrastructure.

Kazakhstan announced a $3.5-billion–1,875-mile pipeline deal earlier in June with the Chinese National Petroleum Company.

And the Caspian Pipeline Consortium signed a $2-billion deal in May to build a pipeline linking Kazakhstan’s Tengiz oil field to Russia’s Black Sea port of Novorossiisk.

Peak throughput of the CPC route is pegged at 67 million metric tons (1.34 million barrels per day) by 2012 to 2014.


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