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 | | Odessa-Brodi Pipeline,
Baku-Tbilisi-CeyhanCompetition Or Alternative |
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| By Rafael Abbasov |
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During the last couple of months, Azeri officials have stated their intentions to establish closer relations with Ukraine on the issue of Caspian oil transit via the Ukrainian Odessa-Brodi Pipe. These intentions are based on the serious troubles the Ukrainian pipe project has suffered since Azeri President Heydar Aliyev stated that after the BTC Main Export Pipeline started operation, the Baku-Supsa oil pipeline would stop its work. The Ukrainian problem is fundamentally commercial: the unclear future of the Odessa-Brodi pipeline project was based entirely on the Baku-Supsa pipe. AIOC-operated Baku-Supsa currently transports Azeri oil, and is planned to transport Kazakh oil as well.
Analysis of the situation suggests that the proposed Ukrainian pipeline would be used for two reasons. The first is Baku's desire to officially diversify the oil supply to the international energy market. According to an interview between Vice President of SOCAR Ilham Aliyev and a Ukrainian agency, Baku started negotiations on the Odessa-Brodi Pipe quite some time ago and has had enough time to conduct a careful study of it. Aliyev stressed that Azerbaijan presently has large stocks of oil, and it is expected that the level of oil extraction will increase sharply. "That's why we're interested in alternative routes for its transportation to the world market, especially as it will cross friendly countries," he stated. In contrast to the widely supported BTC route, the Odessa-Brodi pipeline is considered by the Azeri government as an attractive means for diversifying the supply of Caspian energy.
Therefore, the Odessa-Brodi Pipe project has have a level of economic profitability because of the demand of international oil powers involved in Caspian projects. According to general calculations of Caspian energy reserves unveiled by the Azeri and Kazakh governments, several possibilities exist along with the existing pipelines in terms of making transport possible via Ukraine. The Odessa-Brodi project requires that Caspian oil be transported through Baku-Supsa and Tengiz-Novorossiysk, transferred to the Ukrainian terminal "Yugnij" by tankers, and then forwarded to Poland and Hungary. Local specialists forecast that Azeri Light transported via this route will remove the Russian Urals from this segment of the European market, owing to the high quality of Azeri Light and its low net cost in comparison with Ural oil.
Analysis of current production and the schedule of operations of the Caspian projects' operators prove the idea that the Odessa-Brodi may be fulfilled. For instance, according to RUSENERGY, Chevron plan to increase Caspian oil production to 37.5 million tons by 2010. By 2006 to 2010, the Azeri AIOC oil consortium will produce at least 40 million tons per year. The development of the enormous Kazakh Kashagan oil field with proven reserves of 75 million to 100 million tons is a visible factor of oil export growth from the region. Thus, preliminary evaluations result in the demand for the Ukrainian energy route.
The second issue supporting the Ukrainian pipe is the US-led regional energy security program, according to which the US State Department is highly interested in curtailing GUAAM countries' de-pendency on Russia and Iran. Azerbaijan and Ukraine are members of the GUUAM coalition. In order to bolster energy security of GUUAM member-countries, it is necessary that alternatives are available to move the energy supply to the world market, including through BTC as well as Odessa-Brodi.
Characteristics Of The Odessa-Brodi Pipe
The pipe will have a length of 674 km and a diameter of 1,020 mm. The annual transit capacity will equal 9 million to 14.5 million tons, with the possibility to increase to 40 million tons. The profitable rate of transit is indicated at about 6 million tons annually. According to Ukrainian officials, 1 ton of oil transported through the Baku-Supsa-Odessa corridor to Europe would cost $2.9. Therefore, 1 ton of oil transported through Baku-Supsa to the Black Sea would cost $1.23; 1 ton transported from Supsa to Odessa on tankers would cost $0.3; via the Odessa-Brodi pipeline, the same amount of oil transported would cost $1.
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