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Azerbaijan: BP Denies Seeking To Exclude Competition In Caspian Oil Pipeline

A major backer of the Baku-Ceyhan project has denied that it wants to exclude other companies from using the Caspian pipeline. The controversy seems to be a sign of how much has changed for the U.S.-backed route, which previously suffered from criticism that it would not have enough oil.

Boston, 4 July 2001 (RFE/RL) -- The biggest foreign oil company in Azerbaijan has denied a report that it would keep other countries and competitors from gaining access to the projected Baku-Ceyhan pipeline.

The report last week by "The Wall Street Journal" said that Britain's BP oil company would limit the use of the planned pipeline to Turkey by excluding oil from Kazakhstan and Turkmenistan until 2012.

The report was based on an interview with BP's chairman, Sir John Browne. He was quoted as saying that the pipeline could be filled to capacity from two Azerbaijan projects in which his company holds the largest stakes.

The first is the huge offshore oil project of the Azerbaijan International Operating Consortium. The second is Azerbaijan's Shah Deniz gas field, which contains petroleum liquids that can be added to the line.

According to the report, the result would be no available export capacity for other companies like U.S.-based Chevron and Italy's ENI for the next 10 years. Construction of the Baku-Ceyhan pipeline is expected to start next year and be finished in 2004.

But after inquiries from many other news organizations, BP officials have denied the report. In a message to RFE/RL, BP spokesman Mike Bilbo in Ankara said: "Basically, the assertion that BP can unilaterally choke off new Caspian oil is preposterous. [We] are not trying to exclude anyone from the line."

The company notes the U.S.-backed pipeline project had previously been warned that it could not get enough oil from the Caspian to reach its designed capacity of one million barrels per day. Now, in a turnaround that BP calls "an amazing transition," the pipeline is subject to criticism it will not carry enough oil to meet the demand.

BP says that if necessary, there are ways to push more oil through the $3 billion pipeline. Azerbaijan also has alternate pipeline routes. BP says the only real question about the Baku-Ceyhan line is when each oil company will want to use it. Two months ago, BP officials said the flow from the two Azerbaijani projects will peak at 1 million barrels per day in 2008.

BP says several oil companies have voiced interest in joining the sponsor group for the pipeline. But until they commit oil, it says, it makes no sense to add more capacity.

While the entire controversy seems to have grown out of readings -- or misreadings -- of a single statement, it may be a measure of how far the Baku-Ceyhan project has come.

During the administration of former U.S. President Bill Clinton, oil companies questioned the commercial viability of the plan and criticized officials for pushing it as a political initiative. Since then, BP has become the biggest proponent of Baku-Ceyhan.

The company has also turned increasingly optimistic about the amount of oil that can be found in the Caspian to fill the pipeline. Several months ago, U.S. officials argued that early oil from Kazakhstan's giant Kashagan oil field in the Caspian might supplement oil from Azerbaijan. But in the past month, new assessments now say that only Azerbaijani oil will be needed.

These new forecasts may reflect the advanced stage of planning for the pipeline and the failure of Kazakhstan to make a firm commitment of oil to the route. Since 1999, President Nursultan Nazarbaev has made many verbal pledges to ship oil through the line. At one time, the statements led supporters to rename it the Aktau-Baku-Tbilisi-Ceyhan project, using the name of Kazakhstan's Caspian port.

But Nazarbaev now says only oil companies can actually commit oil to the Baku-Ceyhan line, and his government has been negotiating a long-term transit pact with Russia. The country is also interested in a feasibility study for another oil route to Iran.

As the starting date nears for building the Baku-Ceyhan pipeline, it becomes harder to base plans on the possibility of Kazakh oil. The BP message may be that if the project cannot rely on Kazakhstan's commitment, then Kazakhstan cannot depend on the pipeline's availability, either.