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Caucasus/Central Asia: Reports Conflict On Chevron's Oil Export Route

Prague, 17 October 1996 (RFE/RL) -- The search for export routes for Central Asian oil is heating up. While many international oil companies have been interested in developing the oil and gas fields of the Caucasus and Central Asia, none has yet found a reliable route to send the oil to international markets.

Chevron Corporation, one of the first of the Western oil giants to get involved, announced last week that it is testing a channel it says would allow it to transport more than a million tons of Kazakh oil to the West during the next year.

Chevron says that together with its consortium partners, the Mobil Oil Corporation and the Kazakh government, it has already transported about 20,000 tons of oil from Kazakhstan to an Azerbaijani terminal north of Baku. This part of the export route was by tanker ship across the Caspian Sea.

Chevron says that Azerbaijan's state oil company, SOCAR, agreed to accept the oil and deliver an equivalent amount by train to Georgia's Black Sea port of Batumi. But just how successful Chevron has been remains in dispute.

An RFE/RL correspondent in Baku reports that an additional 7,000 tons of Tengiz oil, which arrived at Azerbaijan's Dyubendi terminal last week, has not yet been unloaded. And the independent Azeri news agency, Turan, says that none of Chevron's shipments have been delivered to Georgia.

Those reports conflict with claims by the head of Georgia's department of railroads, Akaki Chkhaidze, who told RFE/RL that a train had, in fact, carried 2,200 tons of oil from Baku to Batumi this week.

A successful test of this route is crucial for the Chevron. The company already has invested about $1.5 billion in Kazakhstan. The general director of Chevron's Tengiz venture, Nick Zana, says he expects annual output to reach seven million tons of oil by the end of this year. But less than half of that amount can be exported through a pipeline to the Russian Black Sea port of Novorossisk.

Chevron and its partners want to build a new pipeline link from Tengiz to Novorossisk, but Russian objections and difficulties in arranging the financing have delayed those plans. With Tengiz production scheduled to double in two or three years time, Chevron now appears anxious about its limitations on exports.

The past week has seen Chevron vice president Richard Matzke traveling to Tbilisi and Baku to facilitate the test shipments. Even if the effort is successful, Chevron and its partners will continue to face a number of potentially insurmountable obstacles to a free flow of oil out of Central Asia.

There are continuing political disputes in the region, with Moscow insisting that any pipeline go across Russian territory. Most non-Russian states are seeking an alternative route.

Because of turmoil throughout the Caucasus, there is a great risk that one faction or another might destroy part of a pipeline in order to advance its political or economic agenda. That has already happened several times to the pipeline carrying Turkmen natural gas to Armenia.

There is the continuing problem of assessing world demand for oil. Over the last several years, demand has been relatively flat. If oil from Central Asia or the Caucasus has a higher price because of extraordinary transport costs, it might price itself out of the world market.

Chevron is not the only international oil company facing problems of these types.

This week, a new dispute flared up between Azerbaijan's leaders and an international consortium which hopes to build a pipeline from Baku to the Black Sea terminal at Supsa in Georgia. That consortium, known as the AIOC, includes British Petroleum, France's Elf Aquitaine, Turkish Petroleum Corp., Russia's LUKoil and Azerbaijan's SOCAR.

Azeri President Haidar Aliyev complained last week that the consortium itself was responsible for the current delays. But a spokesman for the AIOC said that the consortium could do nothing until Baku signs pipeline agreements with Moscow and Tbilisi.

Such problems and disputes are likely to continue given the enormous economic and political stakes for all concerned.