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UZBEKISTAN - The Trans-Caspian 'Corridor'

The US government has provided $750,000 towards a study of crude oil and gas pipelines to be built under the Caspian Sea to link Kazakhstan, Turkmenistan and Uzbekistan with Baku, the capital of Azerbaijan. From Baku, the pipelines would run overland to Turkey. The crude oil pipeline would end at Turkey's east Mediterranean terminal of Ceyhan. The gas pipeline would run overland from Turkey on to the European markets.

Washington has made it clear that the trans-Caspian system of pipelines, or what US officials call "corridor", should be adopted by all the countries concerned. It seems convinced that Moscow's opposition to this and Tehran's lobbying against it will have no serious effects on the project.

The "corridor" idea was first discussed in June 1996 during President Karimov's visit to Washington and talks with both President Bill Clinton and Vice President Al Gore. The idea has since evolved as part of "the Great Game" of geo-political rivalries for influence over Central Asia and the Caspian between the US and Turkey on one side and Russia and Iran on the other side.

The positions of Iran and Russia have not been as identical as those of the US and Turkey, however. On July 6, 1998, Presidents Boris Yeltsin of Russia and Nursultan Nazarbayev of Kazakhstan signed an agreement dividing the seabed resources of the northern Caspian between the two countries, where "another Kuwait" in terms of oil reserves lies under the Kazakh sector. But the pact states that other issues such as pipelines or telephone cables will have to be governed by subsequent agreements.

Iran immediately rejected the Russian-Kazakh agreement and Turkmenistan criticised it. But the latter's position was ambivalent as Turkmenistan and Iran dispute some oil-rich areas in the south-east of the Caspian Sea.

(See background and relevant parts of the surveys of Kazakhstan; of Russia in Gas Market Trends, SP 21; and of Turkmenistan in Gas Market Trends).

By contrast, co-ordination on this matter between Washington and Ankara is very close. The US and Turkey have steadily expanded their influences across Central Asia, with the Turks now having a strong political and business presence in each of Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan and Kyrgyzstan.

Amoco, now a key player in the Caspian region, is considering a number of options for a trans-Caspian system of pipelines including a link with Uzbekistan. It has funded studies for a crude oil pipeline from western Kazakhstan to west Turkmenistan and then on to Baku through a marine section. From Baku the pipeline would run to Ceyhan. The studies have included the option of building an undersea pipeline direct from west Kazakhstan to Baku, excluding Turkmen and Uzbek exports.

Amoco, to be taken over by BP before end-1998 according to a deal signed in August, was approached by the Uzbek government recently with a request for this country to be included in its proposed pipeline project. BP has been approached as well, but the British major has indicated that for the time being it will concentrate on its operations in offshore Azerbaijan.

Amoco leads a consortium for oil exploration and development of four offshore blocks in the Kazakh sector of the Caspian Sea. Amoco holds 50% and its partners are LUKoil of Russia (25%) and state-owned KazakhCaspi-Shelf (25%). Amoco is a leading partner in the AIOC consortium producing oil and developing huge offshore fields in Azerbaijan.

(If the BP takeover materialises as planned, the resultant $100 billion entity would be called BP/Amoco and would become the third biggest multinational in the world next to Shell and Exxon).

In June 1998, Amoco Eurasia formed a consortium with a new pipeline JV of Bechtel Enterprises and General Electric Capital, to build a 1,200 km gas pipeline from Turkmenistan to Turkey, with the Caspian marine section from the west Turkmen coast to end at Baku. The pipeline would be extended from Turkey to the European markets at a later phase.

Amoco Eurasia has estimated that the 1,200 km gas pipeline would cost about $2.4 billion. Its construction would take three years, it says.

Called TransCaspian Gas Pipeline System, the project would begin from a point near Turkmenbashi and would run under the Caspian waters to a land-ing point near Baku. Work to be contracted would involve engineering, design, procurement and construction.

The overland route would continue across Azerbaijan and Georgia to Erzurum in eastern Turkey, where it would link up with Turkey's main network of gas pipelines.

Companies from Turkmenistan, Azerbaijan, Georgia and Turkey, as well as global investors, would be invited to join the TransCaspian consortium. According to an Amoco statement, in the first phase the gas will come from eastern Turkmenistan.

Ultimately, other gas exporters such as Uzbekistan and Kazakhstan would join in and the pipeline's capacity would rise to 1,225 BCF/year for delivery to markets in Turkey and Europe.

A briefing on this project was done by the consortium members for Turkey's ministry of energy and natural resources. The consortium believes Turkish approval is crucial for this project, with the US pushing behind the scenes.

Bateman, a Dutch/South African company controlled by a South African/ Israeli family, has also been approached by Tashkent to help in promoting pipeline projects. Bateman is to upgrade Turkmenistan's internal pipeline system from its eastern province and will extend it to Turkmenbashi - among projects in which this company is involved in Central Asia.
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Publication:APS Review Oil Market Trends
Date:Oct 5, 1998
Previous Article:UZBEKISTAN - Independent Export Pipelines
Next Article:Opportunities In Oil & Gas Drilling In The GCC Region.

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