Middle East Economic Survey
VOL. XLIX
No 29
17-Jul-2006
Baku-Tbilisi-Ceyhan Crude Oil Pipeline: Milestones Along The Way
The collapse of the Soviet Union in 1991 opened up the Caspian Sea and Central Asia regions, known to be rich in hydrocarbon resources. Azerbaijan’s promising reserves attracted numerous foreign majors. As it became clear that Western companies would develop and export these resources, Turkey became concerned over the growing number of tankers, mostly from the Russian port of Novorossysk, that would pass through the Bosphorus and Dardanelle straits. So – with US backing – it proposed that an overland pipeline be constructed to ‘by-pass’ the Turkish waterways. MEESrecalls some of the milestones of the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline project, inaugurated on 13 July 2006.
1994
13 March Fatal collision between oil tanker and freighter inside Bosphorus strengthens Turkey’s argument for overland pipeline for crude oil from Central Asia (MEES, 21 March 1994).
20 September Azerbaijan signs ‘the deal of the century’ with nine western companies and Russia’s Lukoil covering the offshore Azeri-Chirag-Guneshli (ACG) oilfields. Russia will not recognize agreement, initial value of which is $8bn (MEES, 26 September 1994).
7 November Russia will not support overland pipeline through eastern Turkey to Ceyhan, insisting on option to ship crude oil from Novorossysk to by-pass pipeline through Bulgaria and Greece (MEES, 7 November 1994).
1995
23 February US State Department: Caspian crude oil exporters need access to multiple pipelines; absence of alternatives gives some countries monopoly over development of entire region (MEES, 3 April 1995).
17 April Shares in Azerbaijan International Operating Company (AIOC) developing offshore ACG oilfields are adjusted, giving Turkey’s TPAO larger stake (MEES, 17 April 1995).
16 October AIOC to export ACG crude oil through two pipelines: Baku-Novorossysk and Baku-Supsa (Georgia), which must be refurbished. First exports in 1996-97 (MEES, 16 October 1995).
1996
12 September World Bank loans $5mn to Turkey for feasibility study examining construction of 900,000 b/d crude oil pipeline from Baku to Ceyhan (MEES, 23 September 1996).
1997
12 November Azerbaijan and AIOC start oil production at offshore Chirag oilfield, raising subject of a main export pipeline (MEP). Azerbaijan supports Baku-Ceyhan route, as do US and Turkey (MEES, 17 November 1997).
1998
28 February AIOC’s first consignment of Chirag crude oil shipped to Novorossysk (MEES, 9 March 1998).
1-2 March At meeting with foreign ministers of Azerbaijan, Georgia, Kazakhstan and Turkmenistan, Turkey fails to win endorsement for Baku-Ceyhan project – 1-1.5mn b/d capacity, cost $2.5bn (MEES, 9 March 1998).
27 May US Trade and Development Agency, Export-Import Bank and Overseas Private Investment Corp support Baku-Ceyhan project (MEES, 1 June 1998).
10 October New York Times report says two-year campaign by Clinton administration to persuade US oil firms in Caspian to adopt Baku-Ceyhan pipeline as MEP “on the brink of failure,” (MEES, 19 October 1998).
18 October Turkish Energy Minister orders ministries and Tupras to stop purchases of crude oil from BP and Amoco due to their reluctance to support Baku-Ceyhan project (MEES, 23 November 1998).
17 November US Energy Secretary Bill Richardson proposes establishment of new company to build Baku-Ceyhan project (MEES, 30 November 1998).
26 November AIOC head says proposed Baku-Ceyhan project could lose $500mn/year through operating costs (MEES, 30 November 1998).
1999
7 May World Bank (WB) study: transporting crude oil via proposed Baku-Ceyhan pipeline more costly than other routes (MEES, 17 May 1999).
16 August US Energy Secretary Richardson: US firmly committed to East-West transportation corridor, including Baku-Ceyhan oil pipeline and oil/gas pipelines across Caspian Sea (MEES, 23 August 1999).
19 October BP Amoco, operator of AIOC, to support Baku-Ceyhan project and take leadership role, saying it is strategic transportation route that should be built (MEES, 25 October).
5 November Turkey: initial agreement on construction of Baku-Ceyhan pipeline agreed with Azerbaijan and Georgia. Russia wants Azerbaijan to forego project and export oil through Novorossysk (MEES, 15 November 1999).
18 November Presidents of Turkey, Georgia and Azerbaijan officially endorse Baku-Ceyhan project. US President Clinton is witness; presidents of Kazakhstan and Turkmenistan are observers (MEES, 22 November 1999).
2000
February Chevron: not be able to supply the Baku-Ceyhan pipeline with crude oil from Tengiz oilfield in Kazakhstan in short-term; most production allocated to CPC pipeline to Novorossysk (MEES, 7 February 2000).
8 May Georgia signs Host Government Agreement for Baku-Tbilsi-Ceyhan (BTC) pipeline (MEES, 8 May 2000).
9 May Azerbaijan signs Host Government Agreement for BTC (MEES, 15 May 2000).
29 May Socar meeting in Baku to discuss formation of Main Export Pipeline Company (MEPCO). All major oil firms active in Caspian invited, plus governments of littoral states, except Iran (MEES, 29 May 2000).
30 August Statoil, a member of the AIOC, says ready to join MEPCO (MEES, 11 September 2000).
9 October Socar and BP initial joint operating, funding and cooperation agreement on construction of BTC pipeline (1,700km/1mn b/d capacity), estimated to cost $2.4bn (MEES, 9 October 2000).
October Azerbaijan government, Socar and group of oil companies led by BP sign series of documents officially launching BTC project (MEES, 23 October 2000).
2001
31 January George W Bush administration supports BTC pipeline (MEES, 5 February 2001).
7 February AIOC says ACG oilfields reserves justify construction of BTC pipeline (MEES, 12 February 2001).
19 February Chevron expresses interest in participating in BTC project (MEES, 19 February 2001).
5 June AIOC: cost of BTC could reach $2.9bn (MEES, 11 June 2001).
20 June Sir John Browne: BP ready to move forward with next phase of BTC pipeline and develop parallel gas pipeline to carry Shah Deniz gas to Turkey (MEES, 25 June 2001).
4 July BP unveils financial structure of BTC sponsor group and says 12-month detailed engineering study launched (MEES, 16 July 2001).
October Eni, operator of Kazakhstan’s offshore Kashagan, joins BTC sponsor group (MEES, 22 October 2001).
2002
March BP, operator of AIOC, awards first contracts for expansion of Sangachal oil terminal south of Baku to process oil and gas exported via BTC and Shah Deniz gas pipeline (MEES, 18 March 2002).
12 June TotalFinaElf, member of Kashagan consortium, joins BTC sponsor group (MEES, 17 June 2002).
12 August Formation of BTC Company (BTC Co), and first contracts for construction of 1,760km BTC pipeline awarded. Cost put at $2.94bn, including $1.4bn for the Turkish sector (MEES, 12 August 2002).
18 September BTC construction inaugurated at Sangachal; Phase 2 development for ACG oilfields sanctioned (MEES, 23 September 2002).
30 October ConocoPhillips, member of Kashagan consortium, acquires 2.5% in BTC Co (MEES, 4 November 2002).
15 November Lukoil sells its 10% stake in AIOC to Japan’s Inpex for $1.25bn (MEES, 25 November 2002).
16 December Azerbaijan/Kazakhstan mull shipping Kazakh crude oil through BTC (MEES, 16 December 2002).
2003
January US government says will train/equip Georgian battalion to secure section of BTC (MEES, 20 January 2003).
28 January BP Azerbaijan says BTC partners committed to investing $2.2bn, even though financing for $2.95bn project yet to be finalized (MEES, 10 February 2003).
4 November International Finance Corporation to provide financial backing for BTC project, now estimated to cost $3.6bn (MEES, 10 November 2003).
24 November BP says Georgia’s Rose Revolution will not threaten BTC project (MEES, 1 December 2003).
2004
3 February Finance package for BTC signed for $2.6bn. Total cost $3.6bn, first oil delivery in early 2005 at rate of 350,000 b/d (MEES, 9 February 2004).
16 October Azerbaijan and Georgian sections of the BTC welded together (MEES, 25 October 2004).
24 November ExxonMobil, AIOC member, will not export its share of ACG crude through BTC, but ship by rail through Batumi (MEES, 29 November 2004). Devon Energy follows suit (MEES, 10 January 2005).
2005
4 April ChevronTexaco acquires Unocal giving it shares in AIOC and BTC Co (MEES, 11 April 2005).
April Turkey says completion of BTC pipeline will make Ceyhan ‘Rotterdam on the Med,’ (MEES, 2 May 2005).
10 May Line-fill of BTC begins from Sangachal terminal; 10mn barrels of oil to fill (MEES, 16 May 2005).
25 May Presidents of Azerbaijan, Georgia and Turkey officially open BTC (MEES, 30 May 2005).
10 August First crude oil reaches Pump Station 1 in Georgia (MEES, 15 August 2005).
August To ensure start-up of BTC pipeline by end-2005, BTC Co partners to fill storage tanks at Ceyhan terminal by tankers sailed from Supsa (MEES, 22 August 2005).
12 October Entry of Azeri Light crude oil in Georgian section of BTC (MEES, 24 October 2005).
28 November BP: Azeri Light crude oil will not reach Ceyhan until spring 2006 (MEES, 28 November 2005).
2006
14 February Azerbaijan says first shipment of Azeri Light crude oil from Ceyhan delayed until May; problems along the 1,076km Turkish section (MEES, 20 February 2006).
23 February Azerbaijan considers building new oil terminal to receive crude oil from Kazakhstan for export via BTC (MEES, 20 February 2006).
14 March BP: first shipment of crude oil from Ceyhan in early summer (MEES, 20 March 2006).
19 April BP Azerbaijan: BTC to cost additional 30% to build, bringing cost to $3.9bn (MEES, 24 April 2006).
28 May BTC Co marks arrival of Azeri Light crude at Ceyhan, initial rate of 150,000 b/d (MEES, 5 June 2006).
4 June BP, operator of the BTC: first shipment of Azeri Light crude oil sails from Ceyhan (MEES, 12 June 2006).
7 June BP Azerbaijan: cost of full field development for ACG oilfields increases to $20bn (MEES, 12 June 2006).
16 June Kazakhstan to ship up to 500,000 b/d through BTC pipeline (MEES, 26 June 2006).
21 June Turkey plans to proceed with construction of proposed 1-1.5mn b/d Samsun-Ceyhan crude oil pipeline, with or without Russia’s support (MEES, 26 June 2006).
Caspian Project Shareholdings
(%)
Shareholders / Projects | AIOC | BTC | Shah Deniz/SCP* | NCSPSA |
BP (UK) | Operator 34.1 | Operator 30.1 | Operator 25.5 | - |
Chevron (US) | 10.2 | 8.9 | -- | - |
Socar (Azerbaijan) | 10.0 | 25.0 | 10.0 | - |
Inpex (Japan) | 10.0 | 2.5 | - | 8.33 |
Statoil (Norway) | 8.6 | 8.7 | Operator 25.5 | - |
ExxonMobil (US) | 8.0 | - | - | 16.67 |
TPAO (Turkey) | 6.8 | 6.5 | - | - |
Devon (US) | 5.6 | -- | - | - |
Itochu (Japan) | 3.9 | 3.4 | - | - |
Amerada Hess (US) | 2.7 | 2.4 | - | - |
Eni (Italy) ** | - | 5.0 | - | Operator 16.67 |
Total (France) | - | 5.0 | 10.0 | 16.67 |
ConocoPhillips | - | 2.5 | - | 8.33 |
LukAgip (Lukoil, Russia) | - | - | 10.0 | - |
National Iranian Oil Co. | - | - | 10.0 | - |
BG | - | - | - | 16.67 |
Shell | - | - | - | 16.67 |
Notes:
* SCP is the South Caucasus Pipeline which runs parallel to the BTC and will carry Shah Deniz natural gas to Turkey. BP is operator of Shah Deniz and Statoil is operator for marketing.
** Eni is operator of NCSPSA through its subsidiary Agip Kazakhstan North Caspian Operating Company (AgipKCO).
Caspian Crude Export Pipelines
