Fri, Jul 14, 2006 - Page 6 News List

Caspian pipeline seen as `lifeline'

SUPPLY A 1,768km oil pipeline through central Asia was once derided as overly expensive, but high oil prices and the stand-off with Iran have changed all that

AP , ANKARA

Turkish workers weld pipeline sections on the final leg of the Baku-Tbilisi-Ceyhan Pipeline on June 5.

PHOTO: AP

Almost a decade ago, then US president Bill Clinton threw his weight behind a multibillion dollar pipeline designed to bring the oil riches of the Caspian Sea to the West, bypassing Russia and tapping a source of crude outside the unstable Middle East.

Critics derided the proposed 1,768km, US$3.9 billion pipeline -- snaking through Azerbaijan, the mountains of Georgia and northern Turkey before hitting the Mediterranean coast -- as too expensive and too difficult to build.

Yesterday, the leaders of those three nations were to gather at the port of Ceyhan to formally inaugurate the pipeline. With oil now near US$75 a barrel -- triple the price as when Clinton was president -- and Iran harboring nuclear ambitions, the once controversial project looks far more attractive.

"No one would have thought that when oil reached Ceyhan it would be US$75 a barrel," said Suat Kiniklioglu, director of the German Marshall Fund of the US' Ankara office. "It's a huge success."

The pipeline was part of a US strategy to diversify the sources and flow of oil imports, cutting the risk to consumers that any shock would affect oil supplies, sending prices higher.

It began pumping late last month and some 430,000 barrels of oil are flowing each day, said Norman Rodda, construction manager for the Turkish section of the pipeline.

That might only be a tiny fraction of the 85 million barrels per day that the world consumes, but with global production stretched and prices skyrocketing, "all supplies matter," said David Knapp, senior editor for global oil market analysis at Energy Intelligence group in New York.

"Additional oil coming into the Mediterranean market helps soften the increase in prices," he said. "It hasn't had a major impact yet, but it is possible that prices would have been higher if that oil was not on the market."

Officials at oil company BP PLC, the pipeline consortium's main participant and the largest foreign investor in Azerbaijan's oil sector, said they expect pumping to increase to 1 million barrels per day by 2008. Kazakhstan recently said it would begin pumping some oil through the pipeline and Azeri production is expected to be boosted to reach that goal.

There is also now talk of building new pipelines across Turkey that would bring Russian oil and natural gas to European markets, and of another pipeline across Bulgaria and Greece that would allow Russian oil exports to bypass the crowded Bosporus, the strait that cuts across Istanbul.

With most of the oil destined for European markets, Turks are hopeful that the pipeline will expand their influence in Europe as they press for EU membership. Oil from Iraq is exported from the same port, but that flow has repeatedly been disrupted by insurgent attacks.

"Turkey is increasingly going to become a more important energy corridor," Kiniklioglu said. "There is certainly a recognition by Europeans, especially Eastern Europeans, that Turkey matters a lot to energy security."

"We all felt that independent access to international markets was essential to the future health and security and stability of the newly independent states," US Ambassador Ross Wilson said in Istanbul on Wednesday.

He called the pipeline "an economic lifeline to the world that is independent of any of the other players that may want to monopolize ... or cut it off."

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