BTC Starts Pumping Oil

President Saakashvili will join his counterparts from Azerbaijan, Turkey and Kazakhstan on May 25 in Baku to mark the official launch the pumping of oil through one of the world’s largest pipelines – the Baku-Tbilisi-Ceyhan pipeline.  This pipeline is expected to bring Georgia an estimated USD 50 million per year for transit of Azeri oil to the Turkish port of Ceyhan, where it will be made available to western markets.

Participation by Kazakh President Nursultan Nazarbayev in this official ceremony is yet another boost for the U.S.-backed and BP-led multi-billion dollar BTC project, signaling Kazakhstan’s willingness to export its oil via the BTC pipeline, thus further increasing the project’s credibility. U.S. Energy Secretary Samuel Bodman will also attend the opening ceremony in Baku.
 
According to the BP Tbilisi Office, a total of 10 million barrels of oil is needed to fill this 1,760 km long pipe, 248 of which are in Georgia. The first flow of oil is expected to reach Georgia in June and Turkey by September. An official ceremony of the launching BTC will be held in Georgia in September and in Turkey in late autumn.

The BTC has the capacity to transport at least one million barrels of oil a day for its initial 40-year operational life.
 
According to the President of the Azerbaijani state oil company SOCAR, Natig Aliyev, expenses for the construction of this pipeline exceeded the initially planned budget and the cost went up to USD 4 billion, 350-400 million more than originally expected. 

BP, which owns 30.1% of the shares of the BTC, along with ten other shareholders funded around 30% of the project cost, with the remaining 70% coming from third party financing, provided by the International Finance Corporation, the European Bank for Reconstruction and Development, seven international export credit agencies and a syndicate of 15 commercial banks.
 
Construction of the BTC has accounted for the largest foreign investment source for Georgia in recent years. According to the BP Tbilisi office, the total value of investments through BTC amounts to around USD 1 billion. In addition, around 3,000 Georgian landowners have received over USD 18 million in compensation for the lands where the pipeline was constructed.
 
At its peak, more than 6,000 people were employed during the pipeline’s construction; more than 75% of these were Georgian citizens. This figure has been gradually reducing as the construction process nears its end, but BP pledged that it will continue employment of around 300 people in Georgia.
 
The idea of constructing the Baku-Tbilisi-Ceyhan oil pipeline first emerged in the mid nineties, and the project’s construction was launched in 2003 as a result of an inter-governmental agreement signed by the Presidents of Azerbaijan, Georgia and Turkey.
 
But the construction process was not easy. Environmental groups were the major troublemakers for the BTC. The 17 kilometer-long portion of the route in Georgia which runs through the Borjomi valley, famous with its mineral waters, still remains the main source of concern for environmental groups.
 
Georgian and foreign experts believe oil leakage, caused either by a natural disaster, most notably a landslide, or the human factor would inflict irreparable damage to this picturesque area.
 
Last July, BP was forced to suspend construction in the Borjomi Valley for two weeks after a demand from the Georgian Ministry of Environment to reassess the situation. Construction was resumed after BP submitted additional safety guarantees to the Ministry. 
 
But environmental groups still fear that the pipeline might damage the valley’s unique ecology.
 
“In my opinion, the fragile ecology of the region, its cultural heritage and several historic monuments are still in danger. I doubt that BP has fully met its commitments over implementing environmental safety measures on this section of the route,” Manana Kochladze of the environmental organization Green Alternative told Civil Georgia.
 
Now security of the BTC overshadows all other concerns of the project. Last October the BP and the Georgian government reached an agreement, through which the BTC pledged to provide Georgia with a range of necessary equipment, including vehicles and accommodation for government security personnel and, in addition, pledged maintenance support. The total value of the items to be provided is USD 6 million, with maintenance support of USD 1 million per year for the life of the pipeline.
 
The Georgian Defense Ministry reported on May 23 that a preliminary agreement has been reached between Georgia, Azerbaijan and Turkey that in case of a security threat to the pipeline, either from terrorism or a natural disaster, the three states will provide assistance to another in an attempt to tackle this threat. Reportedly, Defense Ministers from the three countries will meet later this year to discuss the details of this security cooperation.
 
With the construction of the BTC all but over, Georgia now anticipates the start of another huge energy project. BP is also currently managing construction of BTC’s sister project, the South Caucasus gas pipeline (SCP), which will run parallel to BTC and transport Azerbaijani gas to Turkey via Georgia. With these two projects Tbilisi hopes to decrease its energy dependence on Russia.