Wednesday, 25 February 2004

AZERBAIJAN IS READY TO PARTICIPATE IN UKRAINIAN PIPELINE PROJECT

Published in Field Reports

By Gulnara Ismailova (2/25/2004 issue of the CACI Analyst)

The 674-km Ukrainian portion of the Odessa-Broda pipeline, with a carrying capacity of 9-14,5 million tons of oil annually, was completed in may 2001. It is expected that the capacity of the oil pipeline will be widened up to 40-45 million tons annually.

By the end of 2004, the Baku-Tbilisi-Ceyhan main export pipeline will be completed as well, with a carrying capacity of 50 million tons.

The 674-km Ukrainian portion of the Odessa-Broda pipeline, with a carrying capacity of 9-14,5 million tons of oil annually, was completed in may 2001. It is expected that the capacity of the oil pipeline will be widened up to 40-45 million tons annually.

By the end of 2004, the Baku-Tbilisi-Ceyhan main export pipeline will be completed as well, with a carrying capacity of 50 million tons. The business participation of Azerbaijan in this project is 25%, meaning that the State Oil Company of Azerbaijan Republic (SOCAR) has committed to a yearly delivery of 12,5 million tons of oil.

Rasizade noted that Azerbaijan is ready to deliver oil via the Odessa-Broda pipeline given an increase of oil production. The quantity of oil to be pumped through Ukraine was not stated. Rasizade noted that the pipeline is of great interest to Azerbaijan and oil companies, given the increasing production of hydrocarbons in the Caspian. As it stands, there will soon be a need to increase deliveries of oil through Novorossiysk (Russia) by 2,5 million tons annually and to Supsa (Georgia) by 6 million tons.

In the course of the meetings, the two heads of government commissioned experts of the two countries to estimate the efficiency of Azerbaijan’s participation in the final building of the Odessa-Broda oil pipeline.

Mr. Rasizade noted that Azerbaijan is working on various ways to deliver hydrocarbons to the world market, which makes the Ukrainin project interesting. In turn, Mr. Yanukovich noted that the participation of Azerbaijan in the building of the Odessa-Broda pipeline is a strategic project in the cooperation of two countries.

After returning from Kiev, Rasizade declared that within 1-2 months Ukraine will present the technical-economic grounds of the Odessa-Broda pipeline. He did not exclude the possibility that Azerbaijan may become one of the shareholders in the pipeline, which may be extended up to several Polish cities. Previously, Azerbaijan rejected the project on the basis of a perceived lack of economic efficiency.

While signing on to this project, SOCAR representatives stated that according to the oil strategy of Azerbaijan, the lion part of its oil will be transported through the Baku-Tbilisi-Ceyhan pipeline, but that alternative oil pipelines serve the interests of political cooperation with neighboring countries.

This comes against the backdrop of problems occurring in the Turkish straits. SOCAR representative Mukhtar Babayev recently stated that problems had arisen in connection with the transportation of Caspian oil to Europe through the Turkish straits, the Bosporus and the Dardanelles. Due to weather conditions that forced tankers to wait several days to cross the Straits. As a result, Azerbaijan lost almost $100,000. Moreover, delays in loading at Black Sea ports increase stoppage, as a result of which the exporting countries lose further funds.

These problems affect not only Azerbaijan but also Russia and Kazakhstan. This has led experts to emphasize the interest of Azerbaijan and the other oil exporting countries in the BTC pipeline. Azerbaijan may be interested in the Ukrainian option only if additional oil from Kazakhstan and Turkmenistan transit Azerbaijan. The way out seems to be rekindling negotiations with Astana on increasing deliveries of Kazakh oil to Azerbaijan. In this context, the upcoming visit of President Ilham Aliyev to Kazakhstan will come in handy.

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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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