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http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1031119363421&p=1012571727169 Financial Times September 16, 2002 'White elephant' pipeline overcomes doubts By David Stern -The idea of the pipeline actually being built would have come as a shock to many industry experts only two years ago, when it was being described as a white elephant, only being taken seriously because it enjoyed strong backing from the US government. The formal beginning of the project follows a nine-member consortium's decision last month to proceed. The group - which includes BP, the project's operator, Norway's Statoil, Unocal of the US and the Azeri state oil company Socar - also awarded initial construction contracts. -Others....perceived a not-so-hidden attempt to lock Russia and Iran out of the Caspian oil game. -What has happened in the meantime to make the pipeline a reality, say some observers, is that oil companies, faced with pressure from the US government, found their own arguments for building it. -Rather than creating a new geopolitical reality, The pipeline merely underlines the one that already exists. Azerbaijan, Georgia and Turkey are as ever staunchly pro-western, while Iran still finds itself the odd man out in the region. After years of controversy, construction will begin on Wednesday on a $3bn pipeline designed to carry crude from the Caspian Sea to the Mediterranean. The presidents of Azerbaijan, Georgia and Turkey are expected to attend the inauguration ceremony in Baku, the capital of Azerbaijan. The idea of the pipeline actually being built would have come as a shock to many industry experts only two years ago, when it was being described as a white elephant, only being taken seriously because it enjoyed strong backing from the US government. The formal beginning of the project follows a nine-member consortium's decision last month to proceed. The group - which includes BP, the project's operator, Norway's Statoil, Unocal of the US and the Azeri state oil company Socar - also awarded initial construction contracts. The 1,760km Baku-Tbilisi-Ceyhan (BTC) pipeline is scheduled to be finished by the beginning of 2005, in time to ship some 450,000 barrels per day from BP's main Caspian interest, the Azeri-Chirag-Guneshli offshore structure. It has been called the most political pipeline ever built. The project was said to be uncommercial because there was not enough oil in the Caspian to fill it. US officials said they wanted it because Caspian producers should enjoy a variety of export options and because oil shipped to the Mediterranean offered the best choice both economically and environmentally. Others, however, perceived a not-so-hidden attempt to lock Russia and Iran out of the Caspian oil game. Tehran was lobbying hard to swap Caspian oil in the country's north in exchange for Iranian crude in the south. Russia, for its part, already maintained a stranglehold on oil coming from Kazakhstan, and shipped a portion of Azerbaijan's production. US officials said privately that they wished to avoid too much dependence on Transneft, the Russian pipeline monopoly. What has happened in the meantime to make the pipeline a reality, say some observers, is that oil companies, faced with pressure from the US government, found their own arguments for building it. In this way, the pipeline's political basis did not disappear, but rather was folded into the commercial considerations. "What is new is that this is still a political pipeline, but at the same time the companies' commercial motive is clearly in line," says Christopher Langton, an analyst with the International Institute of Strategic Studies. At the same time, the region has seen a realignment of forces, with Moscow finding more common cause with Washington since September 11 2001. Previous objections to BTC, which were already on the wane, accordingly melted away. "Russia gradually concluded that there was nothing they could realistically do about it - and more importantly, that its negative effect on Russian interests would be marginal or zero," says Laurent Ruseckas, Caspian region analyst for the US-based Cambridge Energy Research Associates. Rather than creating a new geopolitical reality, The pipeline merely underlines the one that already exists. Azerbaijan, Georgia and Turkey are as ever staunchly pro-western, while Iran still finds itself the odd man out in the region. Likewise, BP dropped its argument that there was not enough oil yet to justify construction. The UK multinational now says that, based on the reserves of the Azeri-Chirag-Guneshli fields it operates, the pipeline is commercial. One of the issues remaining is the question of how to structure the project's finance. Thirty per cent of costs will come from the companies' own equity, while 70 per cent will be borrowed from international banks and lending institutions. Officials familiar with the project say lenders are examining closely the project's details, since the pipeline crosses a region rife with political and environmental risks. But few observers expect the pipeline company to fail to come up with the needed cash. At the worst, they say, companies will have to pay costs out of their own pockets until early next year, when finance details should be completed. Another important obstacle was removed recently, when Heydar Aliyev, the Azeri president, published a decree describing how his cash-strapped former Soviet country would come up with the approximately $200m required for its participation. __________________________________________________ Do You Yahoo!? Yahoo! Finance - Get real-time stock quotes http://finance.yahoo.com --------------------------- ANTI-NATO INFORMATION LIST ==^================================================================ This email was sent to: archive@jab.org EASY UNSUBSCRIBE click here: http://topica.com/u/?a84x2u.bacIlu Or send an email to: [EMAIL PROTECTED] T O P I C A -- Register now to manage your mail! http://www.topica.com/partner/tag02/register ==^================================================================
