TURKEY: World Bank funds Central Asian pipeline study

27 September 1996

The World Bank on 13 September approved a $5 million loan towards the $5.25 million cost of feasibility studies on a massive, $2,000 million-2,500 million pipeline to export 45 million tonnes of oil a year from the Caspian Sea region via Turkey.

The World Bank will lend the funds to state pipeline agency Botas, which is co-ordinating the feasibility studies for the Turkish-proposed project. Botas will meet the remaining cost of the studies.

Bids for the feasibility studies have been submitted to Botas from a shortlist of the US' John Brown Engineers & Constructors and Brown & Root, Italy's Snamprogetti and Germany's PLE, according to contracting sources.

The World Bank also recently indicated it would also be prepared to provide financing for the Caspian pipeline if the studies showed it to be feasible on economic, security and environmental grounds.

Ankara in the spring decided to concentrate its efforts on the Caspian Sea pipeline to transport main oil production from a massive Caspian Sea concession, together with other Central Asian oil output.

This followed the rejection by the concession's operator, the Azerbaijan International Oil Operating Company (MOC) of a $139 million Turkish funding offer for a routing through Georgia to Soupsa on the Black Sea for early oil exports.

Although the AIOC itself will not reach a decision on the main oil routing until summer 1997, Natik Aliyev, the president of Azeni state oil company Socar, announced in August 1996 that only one main pipeline would be used to export Caspian oil.

When approving the loan, the World Bank noted that Turkey faced soaring energy requirements, rising by 5.3 per cent a year to reach a projected 85.8 million tonnes of oil equivalent by 2000. Existing sources of crude would not be sufficient to meet this demand, the bank said, adding that Turkey had been forced to look for alternatives due to the continuing closure by UN sanctions of Iraq's twin, trans-Turkey export pipelines.

Re-opening of the pipelines had been expected in mid-September. However, the UN suspended an offer of limited oil sales no Baghdad for the purchase of humanitarian aid, after Iraqi troops, in concert with supporters of the Kurdish Democratic Party, seized the northern Iraqi city of Arbil.

The World Bank loan will carry a fixed interest rate in US dollar terms, and will mature in eight years, including a three-year grace period for interest payments.

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