RFE/RL Caucasus: Is The BTC Oil Pipeline Saving Europe
>>From Russia Or From OPEC?
Tuesday, 31 May 2005
According to a 9 April 2002 report by the U.S. Congressional Research
Service (CRS), the Caspian region holds oil reserves of 18-34 billion
barrels, or roughly 1.8-3.3 percent of the world’s proven reserves.
These figures are based in part on estimates provided by the
U.S. Energy International Administration, which breaks down the
reserves on the following country-by-country basis:
Azerbaijan — 4-13 billion barrels (bbl)
Iran — 0.1
Kazakhstan — 10-18 bbl
Russia — 2.7 bbl
Turkmenistan — 0.6 bbl
Uzbekistan — 0.6 bbl
Some industry estimates, however, are lower. The CRS report also
cites figures from British Petroleum/Amoco indicating smaller proven
reserves in Azerbaijan (7 bbl) and Kazakhstan (8 bbl) and projecting
a regional total of about 16 bbl. (BP/Amoco’s figures do not include
estimates for Russia and Iran.)
These figures are roughly comparable to U.S. oil reserves of 22
billion barrels. But while the Caspian is an important source of oil
for Europe, it may not be a long-term strategy for energy independence
from Russia or OPEC — the original goal behind the Baku-Tbilisi-Ceyhan
(BTC) pipeline.
The 1,770-kilometer (1,010 mile) BTC pipeline — built at a cost
of $3.6 billion and capable of pumping 1 million barrels a day —
went into operation on 25 May. Regional leaders put on a brave face,
hoping to convince the rest of the world that from here on out, Europe
would no longer be dependent on Russia and its export routes. BTC,
it was hoped, could save the continent from the potential threat of
a Moscow energy monopoly.
Vafa Guluzade, a former foreign affairs adviser to the Azerbaijani
government, told “The Wall Street Journal” on 25 May that BTC will
neutralize any Russian attempts to use economic levers to bring former
Soviet republics back under its wing.
THE CPC
Russia’s stance on Caspian export routes became clear in 1995, with
the forming of the Caspian Pipeline Consortium (CPC) — of which the
U.S. Chevron Texaco corporation was one of the largest shareholders.
Russia itself owned a 24-percent stake in the CPC and lobbied actively
for the construction of a pipeline from Kazakhstan’s Tengiz oil field
to Russia’s Black Sea terminal at the port of Novorossiisk.
A majority of the route crosses through Russian territory, but Chevron
Texaco did not appear to share concerns in Washington that Moscow
would move to control the flow of oil across Russia.
Chevron Texaco established itself as a player in the Kazakh oil
industry in April 1993, when it signed an agreement to set up the
company TengizChevrOil on an equal partnership basis with the Kazakh
government.
Since the completion of the CPC in 2001, Kazakhstan has steadily
increased the volume of crude it ships via this route. According to
a 13 January 2005 article in “The Moscow Times,” some 350,000 barrels
of Kazakh oil passed through the CPC daily in 2004.
At present, almost all of Kazakhstan’s oil exports cross Russia and
are then shipped by tanker through the Bosporus. But it is uncertain
how long this will continue. Turkey, citing ecological risks, is
set to limit tanker traffic through the straits. It is reasonable to
assume that as Kazakh oil production increases, some of its exports
may be routed through the newly opened BTC line, in order to avoid
political problems with Ankara.
THE BTC OPENS
At the BTC’s 25 May opening ceremonies, Russian President Vladimir
Putin’s special envoy for energy cooperation, Igor Yusufov, failed to
make a scheduled appearance. The Interfax news agency reported that
Yusufov had fallen ill and had sent his regrets. No other high-ranking
Russian official was apparently available to act in his stead.
Russia’s “Kommersant Daily” on 25 May suggested that the BTC, rather
than being a purely economic venture, was more of a “political” project
meant to isolate Iran and Russia. The paper went on to speculate the
United States would also use the BTC for added advantage, by bringing
in troops for pipeline security and thus bolstering its presence and
influence in the region.
Pipeline security was also in the thoughts of Mikhail Margelov, the
chairman of the Russian Federation Council’s International Affairs
Committee. Interfax on 25 May cited Margelov as saying, “First and
foremost, it is a question of [Russia’s] national security and the
expediency of a foreign military presence in the region, which would
look especially strange against the background of the pullout of
Russian bases from Georgia,” he said.
“Russia has had enormous experience with maintaining a [military]
presence in the region. We all are partners in the antiterrorist
coalition, and it makes attempts to use the new pipeline as a pretext
for enhancing a foreign military presence in the region doubly
outrageous,” he said.
The British press, by contrast, suggests the BTC is not about
bolstering Washington’s regional profile. The “Independent” daily
wrote on 25 May the BTC was built in order to “ease the reliance of
the West on OPEC and bring cheaper fuel to our filling stations.”
The “Times” daily added that the BTC “is crucial in lessening Western
dependence on oil from the Middle East.” Left unexplained was how the
Caspian, with its 34-billion-barrel potential, could prove a formidable
rival to OPEC, with its proven reserves of over 800 billion barrels.
Britain’s anti-OPEC tendencies can perhaps be explained by the fact
that British Petroleum (BP) is the main partner in the international
consortium that built the BTC. BP is optimistic the pipeline will
meet all expectations. Tony Hayward, BP’s head of exploration and
production told “The Wall Street Journal” on 25 May the pipeline
“is opening up a new hydrocarbon province.”
BP, however, is also a partner of the Russian oil company TNK, and as
such is working to supply Europe with Russian oil as well. It seems
fair to say that BP is playing both sides of the coin: ensuring that
Russia has a large market for its oil in England and elsewhere in
Europe — and thus increasing the risk of monopoly — while at the same
time leading the forces opposed to a Russian energy blackmail scheme.
It was BP-TNK which, with the support of the Putin government, insisted
in 2004 that the Odesa-Brody pipeline built in Ukraine to transport
Caspian oil to Europe be used in the reverse direction, to transport
BP-TNK oil to a terminal outside Odesa for tanker transport through
the Bosporus — thereby going against Western desires to limit tanker
traffic through the straits.
Writing in “The Wall Street Journal” European edition on 10 October
2003, Robert McFarlane, who served as national security adviser to
U.S. President Ronald Reagan, noted: “When Ukrainian Prime Minister
Viktor Yanukovych was in Washington this week, certainly one issue
for discussion was last week’s decision by Ukraine’s state pipeline
company to move forward toward reversing the use of the Odesa-Brody
oil pipeline in Russia’s favor…. Russian oligarchic interests,
however — with Britain’s BP unfortunately in tow — wish to use that
pipeline themselves, in the opposite direction…. This would cancel
all the hopes that had been vested in the Ukrainian pipeline.”
The new Ukrainian government is attempting to once again reverse the
flow of the Odesa-Brody pipeline to its original south-north direction,
but is finding few suppliers from the Caspian to fill the pipeline.
The fate of the BTC pipeline will be determined to some degree by
Kazakhstan’s willingness, or need, to allocate more oil for delivery
into the pipeline. And while Kazakh President Nursultan Nazarbaev
publicly agreed to provide some oil for BTC, he specified neither
how much nor when. Astana is also seeking to supply China and will
largely maintain its current deliveries to Novorossiisk. Whether it
will need to send a significant quantity of additional oil through
the BTC is uncertain. But the success of the Baku-Tbilisi-Ceyhan
pipeline depends in large part on that question.