Caspian Oil Transportation.

Although successful evacuation of Caspian oil to international markets was seen to be the greatest challenge to be solved in 1995, today a variety of Caspian export options are working well. With a foreseeable production of 3mmbd, the bulk of Caspian oil will move to the proximal energy hungry markets of the Mediterranean and the Black Sea.

The environmentally friendly low gravity low sulphur crudes of the Caspian will become strategically important to the EU; but are unlikely to play a similar role for North America.

Some significant volumes of Caspian oil will move south to Iran to service their northern refineries. But Iran is a market and not a transit country, as it is inconceivable that they would wish to facilitate the transit of large volumes of Caspian crude that would threaten Iranian market security in East Asia.

Caspian oil swaps of up to 400kbd would roughly service half of Iran's northern market needs, and currently conforms to strategic plans for the construction of the new Nekka to Tehran pipeline and various northern refinery upgrades.

The multiple export options we see in the Caspian today will continue to operate to maintain competitive options and operational flexibility.

The Caspian currently has an export capacity of more than 800kbd. However, it is the two mega-pipelines of CPC (1.25mmbd design capacity) in the north and BTC (1mmbd design capacity) in the south that will dominate future Caspian oil evacuation.

To the north phase one of the CPC pipeline should already be operational (540kbd). To the south we are confidently told that BTC will be operational in 2004 (phase one 400kbd). Both pipelines are planned to be fully operational by 2010.

There have been mixed messages over Kazakh oil being made available to service BTC from Aktau (ABTC) for the early stage of BTC pipeline development. This would seem unlikely in view of spare capacity available in CPC for Kazakh oil; the likely slow pace of development of new oil from Kashegan that by 2010 will have more competitive export options including Iran; and the fact that AIOC will require for themselves the BTC design capacity until ACG goes off plateau in (?) 2015, if full field development proceeds to plan.

However, it is probable that some Kazakh oil will move across the Caspian (Texaco?) to fill the empty AIOC Baku-Supsa pipeline, when BTC becomes operational in 2004/2005.

Limited volumes of export crude from Turkmenistan will continue to use the smaller multiple export routes already available.

Therefore within a planning time frame to 2014 Caspian oil export options will continue to match developing capacity demand.