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ACHIEVING A MILESTONEA rare commitment between governments and business to change the face of Caspian region forever by bringing prosperity and richnes to its people. |
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| By Paul Duggal |
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By 2020 Caspian could be pumping over 6 million barrels a day. That would be roughly 6% of the daily world demand in near future.
Estimates for the oil reserves are anywhere from 35 billion to 300 billion barrels under this landlocked Caspian Sea, surpassing Saudi Arabia and
becoming a force unto itself in the world dynamics, thus cutting the dependency on the turbulent Middle East, especially for the western countries.
Regional oil and gas producers like Azerbaijan, Kazakhstan and Russia are looking to take advantage of the ongoing conflict in the
Persian Gulf coupled with the rising demand for this source of energy in Far East and Asian markets.
For reasons stated above, United States have supported the building of a pipeline from
Baku to Ceyhan in Turkey via Tbilisi. The route itself gave this project its name - BTC
pipeline (Baku -Tbilisi - Ceyhan), 1760 km's. in length, one of the longest in the world
and the contract came to be known as "Contract of the Century". The cost, more than 3 billion dollars, starting operations from the year 2004,
initially carrying 1 million barrels a day, a small fraction of the total potential.
BTC also gives the opportunity to the oil giants involved, to actually
own a share of the project unlike in Middle East where oil companies act only as contractors or in Siberia, with the dominance of Russian oil
companies, there is very limited choice to stake a bigger slice of the pie. This region is the best hope for these companies to build
resources thus generating long-term oil revenues.
Amidst all the hope and at times uncertainties of financing this opportunity comes a shot in the arm by way of announcement by
International Financial Corporation to finance the Azeri -Chirag -Deepwater Gunashli (ACG) phase 1 oil field and BTC pipeline, giving this project
a tremendous boost it needed.
ACG Phase 1 oil field involves the development of an oilfield off Azerbaijan in the Caspian Sea. IFC's investment in ACG Phase 1 consists
of loans of up to 30 million for its own account and further loans of up to 30 million to be commercially syndicated. The total cost of ACG Phase 1 is
approximately $3.2 billion.
The BTC pipeline will extend from the ACG field through Azerbaijan and Georgia, to a terminal at Ceyhan on the Mediterranean coast of
Turkey. IFC's investment in the BTC pipeline consists of a loan up to $125 million for its own account and a loan of up to $125 million in commercial
syndication. The total cost of BTC is approximately $3.6 billion.
Azerbaijan is expected to generate $29 billion in oil revenue over the next 20 years, when the full phases of the ACG field are
developed. From the two proposed projects, pipeline transit revenues to Georgia are expected to be approximately $500 million. Turkey is expected
to earn $1.5 billion from pipeline and terminal operations, transit fees, and upstream investments.
One of the main feature of these projects is the transparency, as all agreements regarding profit
sharing were made public, a first in a project of this nature and enormity. The establishment of State Oil Fund of
Azerbaijan, under the World Bank assistance, is a landmark decision. The fund, already rich by nearly 800 million
dollars shall be audited and disclosed to the public speaks volumes in praise of the commitment this government is
undertaking.
The mission is to promote sustainable private sector, invest in the non-oil sector economy to help
reduce, and eventually eradicate the curse of poverty afflicting this nation, and improve the lives of the people
through generation of thousands of jobs. The expected revenues will heighten the possibilities of creating the
infrastructure and environment that allows individuals and enterprises to flourish.
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