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Today's paper. Last Updated: 06/03/2012

Caspian Pipeline Decision Day Nears

LONDON -- The pipeline route for early oil from the Caspian Sea fields is expected to be announced in Azerbaijan next week, an Azeri oil spokesman said.


After a meeting Wednesday in London of the Azerbaijan International Oil Consortium steering committee, Einar Bergh, government and public affairs manager for the consortium, said Monday's meeting in Baku is expected to last one day, and he couldn't speculate on the outcome.


"A decision will be made Monday and a press release will be issued," he said.


The Baku meeting will involve a further 11 representatives from SOCAR, the Azeri state oil company, and the Azeri government.


Georgia has proposed that first oil be shipped from Baku west to Supsa on the Georgian Black Sea, while Russia wants it transported northwest via the Russian breakaway republic of Chechnya and on to the port of Novorossiisk using largely existing pipeline infrastructure.


First oil is expected mid-1996, with initial flow rates from the Caspian offshore production area -- encompassing the Azeri, Chirag and deep-water Guneshli fields -- pegged at around 70,000 barrels per day, but a further pipeline route will need to be determined by late 1997 to take peak anticipated production of some 700,000 barrels per day.


The route choice is of considerable strategic and political importance. Some $30 billion of investment has already been promised from Western companies.


The Georgian route would mean laying new pipe at a cost of around $250 million.


A simmering border dispute between Azerbaijan and Armenia and Russia's refusal to reopen its border with Azerbaijan may see the Azeri government lean toward the Russian route in an attempt to ease political tension, diplomats have said.


Turkey has said additional oil from Novorossiisk would have to pass through the already-congested Bosphorus and increase environmental hazards.


Wednesday's meeting in London was among the development partners in the consortium, headed by Amoco and British Petroleum and including Norwegian state oil concern Statoil A.S., British company Ramco Energy, and U.S. companies Exxon, Unocal, Pennzoil and McDermott, together with Turkish state oil company TPAO.


Bergh said options for the main pipeline to carry peak production would not be discussed at Baku. "This is a multiphase development. Options for peak production mean agreement will have to be reached on pipeline routes that will carry not only oil from Azerbaijan, but also may take oil and gas from Kazakhstan."




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