Britain's BP oil company said that its partners are likely to approve a project in October to pipe Caspian gas from Azerbaijan to Turkey. Plans for a companion line to the Baku-Tbilisi-Ceyhan oil project now seem to be getting a push, although doubts about Turkey's economy persist.
Boston, 14 August 2002 (RFE/RL) -- Undeterred by Turkey's political turmoil, Western oil companies are preparing to make a major investment in the Caspian gas fields of Azerbaijan.
Speaking on 12 August in Baku, an official from Britain's BP oil company said an international consortium is likely to approve a $3.2 billion project in October to develop Azerbaijan's giant Shah Deniz gas field. The group plans to build a pipeline through Georgia to Turkey, running along the same route as the Baku-Tbilisi-Ceyhan oil line.
David Woodward, president of BP Azerbaijan, said, "I think that all work is going according to schedule, and by 2005 we can start to export Azerbaijani gas to Turkey," the Interfax news agency reported. The export pipeline to the West, known as Baku-Tbilisi-Erzurum, would be the first for Caspian gas.
Woodward's statement was more certain than his remarks quoted by the Reuters news agency in June, when he voiced concern about market estimates by the Turkish state pipeline company Botas. At the time, Woodward said, "We do have to look at how secure our contract is and have more talks with Botas before we move ahead with our $3.2 billion investment."
While the oil companies now seem certain about the gas project, Turkey's political and economic situation is not. Early elections are set for November to settle a government crisis that began after Prime Minister Bulent Ecevit was hospitalized in May. The 77-year-old leader has since returned to work, but not in time to save his coalition government from collapse.
Although the elections may raise hopes for a resolution, the timing means that the outcome will be unknown in October when the oil companies authorize their investment in Shah Deniz.
The links between politics, economics, and energy have been proven all too painfully in the past. In February 2001, a dispute between Ecevit and President Ahmet Necdet Sezer caused Turkey's stock market and currency to plunge, prompting a 9.4 percent drop in gross national product last year and the deepest recession since World War II.
Signs of recovery have been clouded by the political fallout, despite billions of dollars in International Monetary Fund loans. The gas plans could be caught in the same morass because Turkey's projections of gas demand were grossly inflated years before its economic troubles began.
In a "Caspian Energy Update" this week, the Center for Strategic and International Studies in Washington said, "Turkey's energy rhetoric has long been racing ahead of reality."
Analysts have been warning Botas since the mid-1990s that its gas-demand forecasts were too high. In late 1998, the company claimed that growing Turkey would need 19 billion cubic meters of gas. It used 14.5 billion, about 24 percent less. It now claims that Turkey will reach the 2000 forecast level this year, but it has already reduced its estimates three times since January.
In the meantime, Turkey has agreed to buy enormous amounts of gas from countries including Russia, Iran, Azerbaijan, Algeria, Nigeria, and Turkmenistan. The question is where all of the gas will go. "Caspian Energy Update" wrote this week that, "barring a miraculous immediate economic recovery and upturn in consumption, Turkey has a very serious oversupply problem."
The developers of Shah Deniz seem to be stepping right into the middle of the problem. In October, when they plan to approve the project, Russia's Gazprom and Italy's ENI oil company also plan to open their Blue Stream pipeline across the Black Sea, giving Turkey even more gas.
Plans for underground storage may still be years away, and the idea of transit through Turkey to Europe may suffer due to other routes for Russian gas.
But the argument for supplies from Azerbaijan is that they may be cheap enough to undercut the competition, while the ethnic links with Turkey make the pipeline a common goal. With estimated reserves of 1 trillion cubic meters of gas, Shah Deniz is unlikely to stay bottled up for long. The pipeline is also part of U.S. plans to create a Caspian energy corridor.
It is unclear how much the Baku-Tbilisi-Erzurum pipeline may be driven by its companion line for oil. BP has said that savings are possible if the gas project is built alongside Baku-Tbilisi-Ceyhan, but it is unclear how much. Although the consortia for the two projects are separate and include different sponsors, five oil companies are members of both.
In the 1990s, BP officials argued against U.S. plans to build major oil and gas pipelines from the Caspian side by side, saying that it had never been done anywhere in the world. But the company has since adopted the idea, and despite doubts about Turkey, it now seems convinced that it will work.
Boston, 14 August 2002 (RFE/RL) -- Undeterred by Turkey's political turmoil, Western oil companies are preparing to make a major investment in the Caspian gas fields of Azerbaijan.
Speaking on 12 August in Baku, an official from Britain's BP oil company said an international consortium is likely to approve a $3.2 billion project in October to develop Azerbaijan's giant Shah Deniz gas field. The group plans to build a pipeline through Georgia to Turkey, running along the same route as the Baku-Tbilisi-Ceyhan oil line.
David Woodward, president of BP Azerbaijan, said, "I think that all work is going according to schedule, and by 2005 we can start to export Azerbaijani gas to Turkey," the Interfax news agency reported. The export pipeline to the West, known as Baku-Tbilisi-Erzurum, would be the first for Caspian gas.
Woodward's statement was more certain than his remarks quoted by the Reuters news agency in June, when he voiced concern about market estimates by the Turkish state pipeline company Botas. At the time, Woodward said, "We do have to look at how secure our contract is and have more talks with Botas before we move ahead with our $3.2 billion investment."
While the oil companies now seem certain about the gas project, Turkey's political and economic situation is not. Early elections are set for November to settle a government crisis that began after Prime Minister Bulent Ecevit was hospitalized in May. The 77-year-old leader has since returned to work, but not in time to save his coalition government from collapse.
Although the elections may raise hopes for a resolution, the timing means that the outcome will be unknown in October when the oil companies authorize their investment in Shah Deniz.
The links between politics, economics, and energy have been proven all too painfully in the past. In February 2001, a dispute between Ecevit and President Ahmet Necdet Sezer caused Turkey's stock market and currency to plunge, prompting a 9.4 percent drop in gross national product last year and the deepest recession since World War II.
Signs of recovery have been clouded by the political fallout, despite billions of dollars in International Monetary Fund loans. The gas plans could be caught in the same morass because Turkey's projections of gas demand were grossly inflated years before its economic troubles began.
In a "Caspian Energy Update" this week, the Center for Strategic and International Studies in Washington said, "Turkey's energy rhetoric has long been racing ahead of reality."
Analysts have been warning Botas since the mid-1990s that its gas-demand forecasts were too high. In late 1998, the company claimed that growing Turkey would need 19 billion cubic meters of gas. It used 14.5 billion, about 24 percent less. It now claims that Turkey will reach the 2000 forecast level this year, but it has already reduced its estimates three times since January.
In the meantime, Turkey has agreed to buy enormous amounts of gas from countries including Russia, Iran, Azerbaijan, Algeria, Nigeria, and Turkmenistan. The question is where all of the gas will go. "Caspian Energy Update" wrote this week that, "barring a miraculous immediate economic recovery and upturn in consumption, Turkey has a very serious oversupply problem."
The developers of Shah Deniz seem to be stepping right into the middle of the problem. In October, when they plan to approve the project, Russia's Gazprom and Italy's ENI oil company also plan to open their Blue Stream pipeline across the Black Sea, giving Turkey even more gas.
Plans for underground storage may still be years away, and the idea of transit through Turkey to Europe may suffer due to other routes for Russian gas.
But the argument for supplies from Azerbaijan is that they may be cheap enough to undercut the competition, while the ethnic links with Turkey make the pipeline a common goal. With estimated reserves of 1 trillion cubic meters of gas, Shah Deniz is unlikely to stay bottled up for long. The pipeline is also part of U.S. plans to create a Caspian energy corridor.
It is unclear how much the Baku-Tbilisi-Erzurum pipeline may be driven by its companion line for oil. BP has said that savings are possible if the gas project is built alongside Baku-Tbilisi-Ceyhan, but it is unclear how much. Although the consortia for the two projects are separate and include different sponsors, five oil companies are members of both.
In the 1990s, BP officials argued against U.S. plans to build major oil and gas pipelines from the Caspian side by side, saying that it had never been done anywhere in the world. But the company has since adopted the idea, and despite doubts about Turkey, it now seems convinced that it will work.