BTC pipeline the 'new Silk Road'

Vincent Boland in Baku

A pipeline that will carry oil for the first time from the Caspian sea to the Mediterranean was opened yesterday, marking the emergence of the Caspian region as a new force in the world's oil markets.

Hailing the biggest investment in the region since the collapse of communism, the leaders of Azerbaijan, Georgia and Turkey turned on the taps of the Baku-Tbilisi-Ceyhan (BTC) pipeline linking the three countries.

"This is the Silk Road of the 21st century," said Ahmet Necdet Sezer, Turkey's president, at the opening ceremony, held in sweltering heat at the Sangachal oil and gas terminal about 40km south of Baku.

The $3.2bn (Ђ2.5bn, Ј1.7bn) pipeline will carry 1m barrels of oil a day when it is fully operational by the fourth quarter of this year, and more if, as expected, Kazakhstan joins the project in the near future.

Lord Browne, chief executive of oil major BP, the biggest shareholder and investor in the BTC pipeline with a 30.1 per cent stake, said in an interview that the project was "an important piece of the jigsaw of the world energy market".

As well as bringing together the presidents of Azerbaijan, Georgia, Turkey and Kazakhstan, the opening ceremony also attracted Samuel Bodman, US energy secretary, an early champion of the project for geopolitical reasons, including a desire to enhance the independence of former Soviet republics from Moscow.

The pipeline's circuitous 1,770km route through some of the most mountainous territory in the Caucasus bypasses Russia, which dominates routes to western markets for oil from the Caspian and central Asia.

Russia was a notable absentee. Lukoil, one of the country's big oil companies, was an investor in the project but sold its stake to Itochu of Japan two years ago.

Oil industry analysts said it was significant that Moscow did not try to block the pipeline, although it often voiced doubts that the project would be completed.

The pipeline also deepens the isolation of Armenia, which has fought a war with Azerbaijan and has no diplomatic relations with Turkey.

Ilham Aliyev, the Azeri president, said the pipeline would bring economic benefits to all participating countries.

He also vowed to restore Azeri sovereignty to the disputed enclave of Nagorno Karabakh, currently occupied by Armenia.

Some diplomats read this as a hint that some of Azerbaijan's new-found oil wealth might be spent on the country's military.

The opening came more than 10 years after the BTC project was announced. If it had not been built, Caspian oil would have had to be shipped through the crowded Bosphorus strait that runs through the centre of Istanbul.

Turkey is pressing for an end to tanker traffic on the strait, which is still used to ship large amounts of Russian oil.

The Caspian's oil reserves, though not as vast as initially hoped, are said to equal those of the North Sea.

http://news.ft.com/