Western Flow for Caspian Pipeline Begins

Even though oil supplies in the United States stand at an all time high, crude prices jumped for a second time in 2005 to $58.60 per barrel during the week of 11 June. And to further world supply the Caspian Oil Pipeline grew by another 1,100 miles during 2005. The first pipeline was completed after years of strife across Afghanistan (READ,) but intervention by the United States in October of 2001 resulted in the southern route of the Caspian Oil Pipeline producing oil by November of 2001.

In June 2005, the western flow from Azerbaijan to the Mediterranean Sea opened for oil production. The $3.2 billion United States-backed Baku-Ceyhan pipeline holds the world's third largest oil and natural gas reserves.

"This global project will completely change the economic situation in Azerbaijan, and in the political sense it will influence the rest of the Caucasus and Central Asia," said Vafa Guluzade, a former foreign affairs adviser to the Azerbaijani government. The billion dollar expansion was funded by British Petroleum (BP,) and begins in Azerbaijan, skirts across Georgia and ends at the Turkish port of Ceyhan. This phase ends the use of primarily Russia pipelines, long thought to have been the cause of economic blackmail between Moscow and the former Soviet Republics.

Azerbaijan is to earn taxes and royalties on the oil and Georgia and Turkey shall profit from transit fees.

In a ceremony to "turn on the taps," as 1 June rolled in, presidents of Azerbaijan, Kazakhstan, Georgia, and Turkey, as well as Energy Secretary Samuel Bodman from the United States were on hand to watch Azerbaijan's President Ilham Aliev inaugurated the flow of oil. "We view this as a significant step forward in the energy security of that region," Bodman said.

Natik Aliev, who is the president of the pipeline consortium, said it would take up to one month or more to fill the Azerbaijani section of the pipeline with oil. Georgia's section would be fulfilled in following weeks and Turkey's section would be filled by 15 August 2005. The pipeline requires 420 million gallons of crude to fill the stretch of pipes. Bodman said, "This is a contribution toward ... an increase supply in oil in the world. It adds a new supplier of some consequence."

The multinational ownership in the Caspian Pipeline Consortium includes: Russian Federation (24 percent,) the Republic of Kazakhstan (19 percent,) the Sultanate of Oman (7 percent,) Chevron Caspian Pipeline Consortium Company (15 percent,) LUKARCO B.V. (12.5 percent,) Rosneft/Shell Caspian Ventures Ltd. (7.5 percent,) Mobil Caspian Pipeline Company (7.5 percent,) Agip International (2 percent,) BG Overseas Holding Ltd. (2 percent,) Kazakhstan Pipeline Ventures LLC (1.75 percent,) and Oryx Caspian Pipeline LLC (1.75 percent.)