Oil Deals Must be Changed Opposition Says

NEW YORK (Reuters) – International oil firms’ multi-billion-dollar oil deals with Azerbaijan should be renegotiated because they are short changing the former Soviet republic–a leading Azeri opposition leader said on Friday.

Isa Gambar–a respected former parliament speaker and once acting president–said he intends to do just that if he comes to power in order to speed up the flow of Caspian oil and improve his country’s benefits from it.

Gambar–who now heads the opposition Musavat (Equality) Party–also accused Middle East oil powers of trying to keep oil prices low to hinder the development of the Caspian energy sector by leaving it at an economic disadvantage to their own low-cost hydrocarbon resources.

A total of 16 international oil companies have signed contracts aiming to invest $40 billion to $50 billion over the next five to 10 years to develop vast oil reserves under the Caspian shelf off the coast of Azerbaijan.

"We in the political opposition consider those contracts were more beneficial for oil companies than the country," Gambar–seen as a leading candidate in the next elections–told Reuters on the sidelines of a New York seminar.

Azerbaijan also is a focal point in an international debate over the best route for a pipeline to transport Caspian oil. The United States favors a pipeline route–estimated to cost up to $4 billion–from Baku–Azerbaijan–to Turkey’s Mediterranean port of Ceyhan. But some international oil companies favor a less costly route through Iran–which the Clinton administration staunchly opposes and the Baku-to-Ceyhan route would avoid.

"We hope when we get to power we will be able to maintain the contracts but improve them in such a way as to start to explore the oil faster…some of those contracts have a delayed factor built into them and we would like to make it that the oil starts to flow as soon as possible," Gambar said.

"The details of a lot of those contracts are being kept secret," he added. "One problem is the timetable for exploration of oil–which is delayed very often–and the second one is the employment of local workers–specialists–engineers–who are not paid very well and not hired very often."

Azerbaijan–which supplied about half the world’s oil in 1900 before taking a back seat with the discovery of Siberian reserves–has an ambitious plan to increase its output by up to sixfold to 60 million tons per year–or 1.2 million barrels per day–by 2005.

On Thursday–the first oil from a BP Amoco-led consortium in Azerbaijan reached Georgia’s Black Sea port of Supsa and will be loaded onto tankers for export.

But that consortium is the only one producing and exporting Azeri crude so far–under an $8 billion–30-year accord in 1994 to develop three fields dubbed "the deal of the century."

"We should not look at those contracts from a point of view of oil production–but also from keeping oil from production," said Gambar in Russian through a translator–adding that the conditions can be changed in agreement with the companies.

"We have information that some major oil-producing countries in the Middle East are interested in keeping the price of oil as low as possible so they would prevent oil production in the Caspian Sea from becoming a reality."

Gambar–who was acting president in May to June 1992 and parliament speaker in 1992 to 93–did not elaborate–but said that "when we come to power–we will create conditions for implementing all those contracts."

The 42-year-old leader–who boycotted presidential elections last year–arguing they were undemocratic–said there was a risk foreign firms will pull out if it turns out that there is not sufficient economically viable oil in Azerbaijan.

An exodus–he said–also could be sparked by any succession problems if President Haydar Aliyev’s health deteriorates further. The 75-year-old Aliyev–who had a recent bout of illness–was the leading force behind bringing in the Western oil firms into Azerbaijan. Gambar expects presidential elections this year or next.

"If there is chaos in the transition period–there will be a problem with the companies and they may try to escape. But we believe that we can stop this chaos and we think that even if there is a short period where there is a problem–we will solve the problems and the companies will return," he said.

A second BP-led consortium–North Absheron Operating Co.–said this week it will leave Azerbaijan in days as its third test well has yielded too little oil and gas–the second one to quit Azerbaijan following the departure of Caspian International Petroleum Co. in January.


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