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Georgia: Work Underway On Pipeline Project

By Floriana Fossato and Vladimir Todres

Tbilisi, 2 May 1997 (RFE/RL) - Work is in progress at Georgia's Black Sea port of Poti, with the harbor's aging cranes unloading more than 3,600 tons of pipe for the construction of new stretches of a pipeline running from Azerbaijan to the Black Sea port of Supsa. The pipe will be used to rehabilitate existing pipelines, and to construct a new oil route through Georgia.

The project is part of an international effort to assure that there will be several pipelines available to carry oil from the Caspian. A number of countries - particularly Russia, Georgia and Turkey - are fiercely competing for a role in the westward export of crude petroleum from Azerbaijan's rich off-shore fields. The operation is controlled by an international consortium of 12 oil companies, led by the Azerbaijan International Operating Company (AIOC -- eds: known in Russia as AMOC).

The Georgian route is one of the two chosen by the consortium for the transport of limited production, or so-called "early oil," coming from the first phase of exploitation of Caspian reserves. The other leads north through Russia's Chechnya republic.

Experts familiar with the multiple pipeline situation have indicated that - on this operation - will depend a decision on a higher-capacity route to handle full-production from the Caspian, within the next five-to-ten years.

Russia has persuaded the consortium to transport oil through Chechnya, claiming Moscow controls the route. But recent comments from Chechen leaders have embarrassed and challenged Moscow.

Chechnya's President Aslan Maskhadov this week called on the consortium to sign a separate transit agreement with Chechnya. Formally, the Chechen stretch is run by Russia's monopoly pipeline company Transneft. But Chechen leaders say no agreement has been reached with them. And, relations between Grozny and Moscow have worsened as each has blamed the other for two recent railway bomb attacks in southern Russia. Russia says "early oil" will start flowing through its pipeline to the Black sea port of Novorossyisk October 1. "Early-oil" pumped through Georgia is expected to be flowing in early 1988, but AIOC officials have said the transport could start even earlier.

Meanwhile, oil officials in Azerbaijan in the last few days have expressed doubts that a final decision on the routing of full-production capacity can be made any time soon. Four countries are considered major competitors: Russia and Georgia, with expanded versions of their "early oil" pipelines; a route through Georgia, Armenia and Turkey; and a fourth option, considered infeasible, through Iran. Last week, the chairman of Azerbaijan's oil company GNKAR, Natik Aliyev, said a decision, expected for the end of April, would be postponed to June, or even later.

The Chairman of Georgia's parliament, Zurab Zhvania, told RFE/RL that he expects the Georgia routing of the oil pipeline to open new possibilities. Zhvania said Georgia does not expect a large economic gain from the transport of "early oil" to Supsa. But, he said, the pipeline will have an "invaluable" future impact, which may attract investments desperately needed by Georgia to improve Tbilisi's deep economic crisis. And, according to Zhvania, "even more important than the pipeline itself" will be the possibility it offers to build an infrastructure and communications network "relaying the West to Central Asia through Georgia."

Our correspondent in Tbilisi says Zhvania's views and hopes are widely held among officials in Georgia. But they could create obvious disputes with other countries, particularly with Russia. Georgian officials said - despite drawbacks, such as the conflict with its separatist region of Abkhazia, and Tbilisi's inexperience in world oil markets - the Georgia pipeline route appears to be increasingly attractive to international oil decision-makers.

Georgi Vashakmadze, director of the Georgian International Oil Company (GIOC) says the "early-oil" pipeline is expected to pump a minimum of five-million ton of oil per year. The transport tariff will be of $.17 per barrel. An Australian company, McConnel Dowel, won last month the tender for the construction of new stretches of the "early-oil" pipeline. According to Georgia's independent news agency Black Sea Press, McConnel Dowel is one of the world's 100 biggest construction companies. Robert Moore, Deputy Chairman of the Georgian Pipeline Company (GPC), a branch of the AIOC consortium, says representatives of McConnel Dowel are this week in Tbilisi "for a kick-off meeting." Moore said rehabilitating the existing pipeline will start by June 15.

The 340-kms-long pipeline will stretch from Azerbaijan's border to the Supsa terminal. Apart from construction and rehabilitation work, pump stations, telecommunications and other infrastructure along the route, as well as a terminal in Supsa will have to be built. Separate tenders were opened for those other projects. The tenders were won by a British (EIE), a German (Blue Watter) and a French company (Entropos). Vashakmadze said the Georgian International Oil Company had n-o say in choosing the winners. Moore said the estimated cost of the projects is $190 million. Last month, the World Bank's Board of Executive Directors approved a $1.3 million loan to finance a feasibility study of the long- term oil route through Georgia. The Georgian International Oil Corporation will add $100,000 to finance the study, aimed at providing a full economic, environmental and commercial assessment of the full-production capacity pipeline from Azerbaijan to Supsa.

The decision has heightened Georgia's hopes. The leader of the opposition Republican party, Ivlian Khaindrava, told our correspondent that the "critical mass of Western economic interests has created a Western political interest in Georgia." According to Khaindrava, this situation can be extremely beneficial for Georgia's political and economic future, as the country "can now afford to be more independent from Russia," despite the presence of Russian troops on its territory. Russian peace-keeping forces are present on the border with the separatist region of Abkhazia. Russia also maintains four military bases on Georgia's territory.

According to Shalva Pichkhadze, a top adviser to President Eduard Shevardnadze, Russia, after the disunion of the USSR, has "lacked a clear economic and foreign affairs conception in the Caucasus." Pichkhadze says this situation has "made clear to newly independent states how to act, in order to survive." And, he said, the creation of cooperation agreements among former Soviet republics on this and other projects is considered very important in Georgia. Pichkhadze agreed with Zhvania that the main benefit of the "early-oil" pipeline project for Georgia lies in the development of the transport and communication system that it will create.