Giant oil pipeline opens

Officials inaugurated the first section of a 1,100-mile, US-backed pipeline today that will bring Caspian Sea oil to Western markets, a project seen as an economic and political boon for the troubled Caucasus region.

The presidents of Azerbaijan, Kazakhstan, Georgia and Turkey were on hand for the ceremony at the Sangachal oil terminal, about 25 miles south of Azerbaijan’s capital, Baku, to open the taps for the first drops of oil to enter the Baku-Tbilisi-Ceyhan pipeline.

The pipeline from Baku to the Turkish Mediterranean port of Ceyhan is seen as a significant move toward reducing the West’s dependence on Middle Eastern oil.

Most Caspian oil exports previously moved through Russian pipelines, often adding to the congestion in the Bosporus strait.

The pipeline “will take new supplies of oil to the world market and will help to demonstrate that security is best achieved by having multiple sources of supply and trade routes,” BP PLC Chief Executive John Brown, whose company leads the consortium that built the pipeline, said at the opening ceremony.

The €2.47bn project, with a capacity of 1 million barrels a day, is the first direct oil link between the landlocked Caspian, which is thought to contain the world’s third-largest oil and gas reserves, through Georgia to the Mediterranean.

The pipeline “opens a new era in the Caspian Basin’s development,” US President George Bush said in a letter read by US Energy Secretary Samuel Bodman. Bush, whose administration is seeking to diversify energy sources, called it a “monumental achievement.”

“The US has consistently supported (the pipeline project) because we believe in the project’s ability to bolster energy security, strengthen participating countries’ energy diversity, enhance regional co-operation and expand international investment opportunities,” the letter said.

Azerbaijan, Georgia and Turkey look to earn substantial revenue from the pipeline, through transit fees and royalties.

“I do not doubt that BTC will be of use both to Azerbaijan and our neighbours. This pipeline first of all will help solve economic and social problems, but the role of the pipeline in strengthening peace and security in the region also is not small,” Azerbaijan’s President Ilham Aliev said at the ceremony.

Turkish President Ahmet Necdet Sezer said the pipeline “can be called the Silk Road of the 21st century.”

Azerbaijan is banking on the pipeline to raise its profile in the world and swing international support behind Baku in its dispute with Armenia over the Nagorno-Karabakh enclave, which ethnic Armenian separatists took control of more than a decade ago. The conflict continues to simmer, undermining the region’s security.

Georgia President Mikhail Saakashvili said the pipeline should help attract investment and improve living standards. Saakashvili has sought to lessen Russia’s influence on his impoverished country, which depends heavily on Russia for energy.

Pipeline officials said it would take up to a month and a half to fill the Azerbaijani section. The Georgian part will be ready after that, and then the Turkish stretch, which Turkish authorities have said should be filled by August 15.

It will take approximately 10 million barrels of crude to fill the entire pipeline. Bodman said on Tuesday that deliveries of oil from the pipeline to tankers at the terminal in Turkey are to begin in the autumn.

Once fully operational, the pipeline will represent a “significant” addition to Western oil supplies, said analyst Jason Kenney of ING Financial Markets, although the time needed to fill it means “you won’t see exports until the later part of the year.”