THE BUSINESS: BP's Azerbaijan venture to pump up pipeline capacity: “David Woodward, president of Azerbaijan operations for BP, which is managing the project, told The Business the company was close to agreement with Eni, Royal Dutch/Shell, Exxon Mobil, and France's Total to ship oil from the giant Kashagan oil development in Kazakhstan…” (ShellNews.net)
By Richard Orange
IN BAKU
26/27 Sept 04
THE partners in the Baku-Tbilisi-Ceyhan oil pipeline from Azerbaijan's Caspian coast to the Mediterranean are planning to increase capacity by 800,000 barrels of oil per day (bpd) after a surge in interest from oil producers in the Caspian. The proposal would take the total amount of oil it can carry to 1.8m bpd.
David Woodward, president of Azerbaijan operations for BP, which is managing the project, told The Business the company was close to agreement with Eni, Royal Dutch/Shell, Exxon Mobil, and France's Total to ship oil from the giant Kashagan oil development in Kazakhstan across the Caspian to the pipeline's terminal near the Azerbaijani capital of Baku. Kashagan will be running in 2009.
He said: "Discussions we've been having in recent months with the Kashagan owners have shown they are serious about transporting significant volumes across the Caspian and into the pipeline. Now the pipeline's become a reality, a lot of people want to talk to us."
An extra 400,000 bpd could be squeezed in by reducing friction with chemicals, he said, and a further 300,000-400,000 bpd by putting in extra pumps, he said.
BP is also in, talks with its Russian sister company TNK-BP to ship oil through the pipeline. The extra capacity will underline the importance of the pipeline to international oil markets. Even before the expansion, the oil BP plans to bring through the pipeline from its Azeri-Chirag-Gunashli field will supply about 25% of new world oil supply in 2005 and 2006.
Crucially, the pipeline brings Caspian oil to European markets, bypassing Russia, Iran and the constricted Bosporus Straits.
Mark Townshend, who is managing the construction of the pipeline, said he was confident the 1,760 km pipeline, which has been opposed by the anti-globalisation movement, would be ready for "first oil'" from the Azeri-Chirag-Gunashli field next May, although it will take five months for the oil to flow to the oil tanker loading terminal in Turkey.
The consortium has worked hard to make up for delays caused by adverse weather last year and has tried to meet the environmental concerns of the
new Georgian government. It has nearly doubled the number of staff working on the pipeline from 12,000 to 22,000 this year, and it has met environmental concerns by burying the pipeline deeper in parts of Georgia.
Townshend said he did not expect costs to be up more than $200m (£1.12m, €1.64m) on the $3bn budget. The biggest extra cost, he said, would come from the partnership's decision to own the crude it is transporting. At today's oil price, filling its 10m-barrel capacity could cost nearly $500m.
BP leads the 11 -partner consortium with a 30.1% stake, followed by Azerbaijani national oil company Socar with 25%.