Caspian Sea oil will begin to flow today
Opening of pipeline seen as boost for regional economy
Associated Press Writer

MAY. 25, 2005
The presidents of Azerbaijan, Georgia and Turkey pulled orange levers Wednesday to send the first flow of Caspian Sea crude into a $3.2 billion pipeline seen as key to reducing the West's reliance on Middle East oil.

By year's end, the 1,100-mile pipeline is to ship up to 1 million barrels a day to Turkey's Mediterranean port of Ceyhan.

President Bush, whose administration is seeking to diversify energy sources, said in a letter read at the ceremony by Energy Secretary Samuel Bodman that the pipeline "opens a new era in the Caspian Basin's development."
  "The United States has consistently supported (the pipeline) because we believe in the project's ability to bolster energy security, strengthen participating countries' energy diversity, enhance regional cooperation and expand international investment opportunities," Bush's letter said.

  The U.S.-backed pipeline realizes several crucial goals for Washington, including reducing dependence on Russian pipelines and avoiding Iran. While the pipeline crosses areas plagued by separatist conflicts, raising security concerns, the countries hope it will be a catalyst for calm and prosperity as well.

  The Baku-Tbilisi-Ceyhan, or BTC, pipeline aims to boost access by the energy-hungry West to the rich Caspian fields, estimated to hold the world's third-largest reserves. Iran, Russia, Azerbaijan, Turkmenistan and Kazakhstan all claim shares of the undersea wealth.

  Standing in front of a transparent section of pipe with Bodman and BP PLC Chief Executive John Brown, whose company leads the consortium that built the pipeline, the presidents pulled the levers that allowed the oil to flow through.

  The pipeline "can be called the Silk Road of the 21st century," Turkish President Ahmet Necdet Sezer said during the ceremony at the Sangachal oil terminal, 25 miles south of Baku.

  It "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," said Brown.

  But the plan to circumvent Russian pipelines has angered the Kremlin. Most Caspian oil exports go through Russian pipelines to the Black Sea port of Novorossiisk, where the oil is loaded onto tankers that squeeze through the busy Bosporus strait. Russian officials tried to persuade Azerbaijan not to sign on to the project.

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

  Azerbaijan is banking on the pipeline to 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.

  The underground pipeline passes within a few miles of Nagorno-Karabakh, and critics of the project have suggested it could be vulnerable to terrorist attacks at various points.

  Azerbaijan also hopes the pipeline will raise its profile in the world, and it tightened security ahead of its inauguration. On Saturday, police broke up a banned demonstration by protesters demanding free elections and arrested demonstrators, with the government citing safety concerns ahead of the pipeline's opening.

  Tensions between the government and the opposition in the tightly controlled former Soviet republic has increased since a 2003 election in which Ilham Aliev replaced his late father, Geidar Aliev, as president in a vote the opposition said was marred by fraud.

  "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," Aliev said at the ceremony.

  The pipeline's route through Georgia does not pass near the two separatist areas in the north of that country, but does traverse comparatively wild areas in the nation where security is fragile. Some of its stretch in Turkey goes through conflict-prone Kurdish areas.

  Georgian President Mikhail Saakashvili, who has sought to lessen Russia's influence on his small, impoverished country, suggested that the pipeline, by spurring investment, could undermine that influence.

  "Because of our geographical position, we've been in the center of attention for various empires," he said in apparent reference to Russia. "However, today Georgia is changing into a place where the largest energy companies in the world are trying to make investments."

  The drive for alternatives to Middle East oil intensified after the Sept. 11, 2001, terrorist attacks highlighted potential regional instability.

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

  Other experts say the new oil will provide only short-term relief to a world that is consuming more crude every year. Oil prices, while down from their recent highs, are still around $50 a barrel.

  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 Aug. 15.

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