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Export Pipeline Inaugurated - International Law Office

International Law Office

Energy & Natural Resources - Azerbaijan

Export Pipeline Inaugurated

July 04 2005

On May 25 2005 the first crude oil was pumped into the Baku-Tbilisi-Ceyhan (BTC) main export pipeline. The inauguration ceremony was attended by the presidents of Azerbaijan, Georgia, Turkey and Kazakhstan, together with government officials from numerous other countries.

The BTC pipeline is only the second crude oil pipeline in Azerbaijan to avoid a route through Russia.

When Azerbaijan achieved independence from the Soviet Union in 1991, its only route for export was through Russian territory. An alternative route was needed in order to avoid over-reliance on Russia. This led to the completion of the 'Western' route through Georgia to Supsa on April 17 1999, followed by that of the long-planned BTC pipeline.

However, the Western route, with its terminal on the Black Sea coast, has contributed to the congestion of Bosporus shipping lanes and the Turkish government has frequently expressed concern as to the consequent environmental risks. The 1,770-kilometre BTC pipeline, with its terminal at Ceyhan on the Mediterranean coast, will provide a solution. Crude oil is expected to arrive in Ceyhan in the last quarter of 2005.

The BTC pipeline, one of the largest projects ever to have taken place in Azerbaijan, has become a symbol of national pride and has been named the Heydar Aliyev BTC Main Export Pipeline in honour of the late president, whose political drive was key to the success of the project.

With the pipeline on the verge of operation, Azerbaijan will soon have an export route for its oil with significant capacity and Baku stands to become a crude oil transportation hub. In future, it is anticipated that large volumes of oil will be shipped across the Caspian Sea to the BTC pipeline, principally from Kazakhstan. A certain amount of oil is already shipped to Azerbaijan from Kazakhstan and Turkmenistan to be loaded onto rail tank-cars for transportation to the Black Sea coast in Georgia. With the operation of the BTC pipeline, the capacity of pipeline and rail shipments will be greatly increased. In the past, there have been proposals for a trans-Caspian pipeline. However, this project may have to wait for the disputed status of the Caspian Sea to be resolved.

Attention will now focus on the progress of the south Caspian pipeline, which will transport natural gas along the same route as the BTC pipeline as far as Erzurum, in northeastern Turkey, before connecting with Turkey's domestic gas network.

In legal terms, while the work on the BTC pipeline construction project is largely complete, attention will be paid to potential actions by environmental groups. During construction of the BTC pipeline, work was halted in Georgia in order to evaluate potential ecological damage to the water resources of Borjomi, through which the pipeline runs.

Further legal work will be required in relation to any potential use of the BTC pipeline as an exit route for Kazakh and Turkmen oil, whether by tanker or by a trans-Caspian pipeline.

For further information on this topic please contact Benjamin Paine at Ledingham Chalmers by telephone (+994 12 493 6669) or by fax (+994 12 498 7132) or by email (Benjamin.Paine@LedinghamChalmers.com).

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