TURKEY: Oil pipeline finance collapses

24 May 1996

The government has withdrawn an offer of $239 million to finance an oil export pipeline from Azerbaijan. The proposal, formally retracted on 7 May, was for the construction of a pipeline through Georgia to carry early production from the Caspian Sea concession held by the Azerbaijan International Oil Company (AIOC). Azerbaijan. Georgia and AIOC had rejected in February the conditions attached to the financing proposal. These included a 6 million-tonne-a-year cap on pipeline capacity, guaranteed work for Turkish contractors and penalties for any shortfall in deliveries.

However, Ankara still wants the proposed pipeline to proceed. Turkey sees the line as the first stage of its proposed $2,500 million3,000 million main pipeline which will run from Central Asia to Ceyhan, near Iskenderun. The Foreign Affairs Ministry said on 9 May that Turkey is even prepared to build a Baku-Ceyhan line on its own initiative.

Last October, AJOC decided to proceed with two export pipelines, one to Turkey, the other via Russia. Caspian Pipeline Company (CPC) has agreed to build a $1,200 million pipeline to transport crude oil to Russia's Black Sea terminal of Novorossiysk (MEED 17:5:96).

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