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Is The BTC Oil Pipeline Saving Europe From Russia Or From OPEC?

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  • Is The BTC Oil Pipeline Saving Europe From Russia Or From OPEC?

    RFE/RL Caucasus: Is The BTC Oil Pipeline Saving Europe
    >>From Russia Or From OPEC?

    Tuesday, 31 May 2005

    According to a 9 April 2002 report by the U.S. Congressional Research
    Service (CRS), the Caspian region holds oil reserves of 18-34 billion
    barrels, or roughly 1.8-3.3 percent of the world's proven reserves.

    These figures are based in part on estimates provided by the
    U.S. Energy International Administration, which breaks down the
    reserves on the following country-by-country basis:

    Azerbaijan -- 4-13 billion barrels (bbl)

    Iran -- 0.1

    Kazakhstan -- 10-18 bbl

    Russia -- 2.7 bbl

    Turkmenistan -- 0.6 bbl

    Uzbekistan -- 0.6 bbl

    Some industry estimates, however, are lower. The CRS report also
    cites figures from British Petroleum/Amoco indicating smaller proven
    reserves in Azerbaijan (7 bbl) and Kazakhstan (8 bbl) and projecting
    a regional total of about 16 bbl. (BP/Amoco's figures do not include
    estimates for Russia and Iran.)

    These figures are roughly comparable to U.S. oil reserves of 22
    billion barrels. But while the Caspian is an important source of oil
    for Europe, it may not be a long-term strategy for energy independence
    from Russia or OPEC -- the original goal behind the Baku-Tbilisi-Ceyhan
    (BTC) pipeline.

    The 1,770-kilometer (1,010 mile) BTC pipeline -- built at a cost
    of $3.6 billion and capable of pumping 1 million barrels a day --
    went into operation on 25 May. Regional leaders put on a brave face,
    hoping to convince the rest of the world that from here on out, Europe
    would no longer be dependent on Russia and its export routes. BTC,
    it was hoped, could save the continent from the potential threat of
    a Moscow energy monopoly.

    Vafa Guluzade, a former foreign affairs adviser to the Azerbaijani
    government, told "The Wall Street Journal" on 25 May that BTC will
    neutralize any Russian attempts to use economic levers to bring former
    Soviet republics back under its wing.

    THE CPC

    Russia's stance on Caspian export routes became clear in 1995, with
    the forming of the Caspian Pipeline Consortium (CPC) -- of which the
    U.S. Chevron Texaco corporation was one of the largest shareholders.
    Russia itself owned a 24-percent stake in the CPC and lobbied actively
    for the construction of a pipeline from Kazakhstan's Tengiz oil field
    to Russia's Black Sea terminal at the port of Novorossiisk.

    A majority of the route crosses through Russian territory, but Chevron
    Texaco did not appear to share concerns in Washington that Moscow
    would move to control the flow of oil across Russia.

    Chevron Texaco established itself as a player in the Kazakh oil
    industry in April 1993, when it signed an agreement to set up the
    company TengizChevrOil on an equal partnership basis with the Kazakh
    government.

    Since the completion of the CPC in 2001, Kazakhstan has steadily
    increased the volume of crude it ships via this route. According to
    a 13 January 2005 article in "The Moscow Times," some 350,000 barrels
    of Kazakh oil passed through the CPC daily in 2004.

    At present, almost all of Kazakhstan's oil exports cross Russia and
    are then shipped by tanker through the Bosporus. But it is uncertain
    how long this will continue. Turkey, citing ecological risks, is
    set to limit tanker traffic through the straits. It is reasonable to
    assume that as Kazakh oil production increases, some of its exports
    may be routed through the newly opened BTC line, in order to avoid
    political problems with Ankara.

    THE BTC OPENS

    At the BTC's 25 May opening ceremonies, Russian President Vladimir
    Putin's special envoy for energy cooperation, Igor Yusufov, failed to
    make a scheduled appearance. The Interfax news agency reported that
    Yusufov had fallen ill and had sent his regrets. No other high-ranking
    Russian official was apparently available to act in his stead.

    Russia's "Kommersant Daily" on 25 May suggested that the BTC, rather
    than being a purely economic venture, was more of a "political" project
    meant to isolate Iran and Russia. The paper went on to speculate the
    United States would also use the BTC for added advantage, by bringing
    in troops for pipeline security and thus bolstering its presence and
    influence in the region.

    Pipeline security was also in the thoughts of Mikhail Margelov, the
    chairman of the Russian Federation Council's International Affairs
    Committee. Interfax on 25 May cited Margelov as saying, "First and
    foremost, it is a question of [Russia's] national security and the
    expediency of a foreign military presence in the region, which would
    look especially strange against the background of the pullout of
    Russian bases from Georgia," he said.

    "Russia has had enormous experience with maintaining a [military]
    presence in the region. We all are partners in the antiterrorist
    coalition, and it makes attempts to use the new pipeline as a pretext
    for enhancing a foreign military presence in the region doubly
    outrageous," he said.

    The British press, by contrast, suggests the BTC is not about
    bolstering Washington's regional profile. The "Independent" daily
    wrote on 25 May the BTC was built in order to "ease the reliance of
    the West on OPEC and bring cheaper fuel to our filling stations."

    The "Times" daily added that the BTC "is crucial in lessening Western
    dependence on oil from the Middle East." Left unexplained was how the
    Caspian, with its 34-billion-barrel potential, could prove a formidable
    rival to OPEC, with its proven reserves of over 800 billion barrels.

    Britain's anti-OPEC tendencies can perhaps be explained by the fact
    that British Petroleum (BP) is the main partner in the international
    consortium that built the BTC. BP is optimistic the pipeline will
    meet all expectations. Tony Hayward, BP's head of exploration and
    production told "The Wall Street Journal" on 25 May the pipeline
    "is opening up a new hydrocarbon province."

    BP, however, is also a partner of the Russian oil company TNK, and as
    such is working to supply Europe with Russian oil as well. It seems
    fair to say that BP is playing both sides of the coin: ensuring that
    Russia has a large market for its oil in England and elsewhere in
    Europe -- and thus increasing the risk of monopoly -- while at the same
    time leading the forces opposed to a Russian energy blackmail scheme.

    It was BP-TNK which, with the support of the Putin government, insisted
    in 2004 that the Odesa-Brody pipeline built in Ukraine to transport
    Caspian oil to Europe be used in the reverse direction, to transport
    BP-TNK oil to a terminal outside Odesa for tanker transport through
    the Bosporus -- thereby going against Western desires to limit tanker
    traffic through the straits.

    Writing in "The Wall Street Journal" European edition on 10 October
    2003, Robert McFarlane, who served as national security adviser to
    U.S. President Ronald Reagan, noted: "When Ukrainian Prime Minister
    Viktor Yanukovych was in Washington this week, certainly one issue
    for discussion was last week's decision by Ukraine's state pipeline
    company to move forward toward reversing the use of the Odesa-Brody
    oil pipeline in Russia's favor.... Russian oligarchic interests,
    however -- with Britain's BP unfortunately in tow -- wish to use that
    pipeline themselves, in the opposite direction.... This would cancel
    all the hopes that had been vested in the Ukrainian pipeline."

    The new Ukrainian government is attempting to once again reverse the
    flow of the Odesa-Brody pipeline to its original south-north direction,
    but is finding few suppliers from the Caspian to fill the pipeline.

    The fate of the BTC pipeline will be determined to some degree by
    Kazakhstan's willingness, or need, to allocate more oil for delivery
    into the pipeline. And while Kazakh President Nursultan Nazarbaev
    publicly agreed to provide some oil for BTC, he specified neither
    how much nor when. Astana is also seeking to supply China and will
    largely maintain its current deliveries to Novorossiisk. Whether it
    will need to send a significant quantity of additional oil through
    the BTC is uncertain. But the success of the Baku-Tbilisi-Ceyhan
    pipeline depends in large part on that question.

    http://rferl.org/featuresarticle/2005/05/206868a6-60ca-4f9a-81f0-dea2f7fbc501.html
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