Oil Consortium Ignored Safer Route For Caspian Pipeline, Group Says

by Emad Mekay

The Central and East European Bankwatch Network says that the planned route for the Baku-Tbilisi-Ceyhan (BTC) pipeline, which connects offshore oilfields in the Caspian Sea with a tanker terminal at the Turkish port of Ceyhan on the Mediterranean Sea via Azerbaijan and Georgia, is not the project's best option.

"Viable alternative pipeline routes were either not assessed at all or the comparisons of alternatives were biased in favour of BP's preferred route," said the group in a report released Monday.

BP, which leads a consortium of oil companies that includes Italy's Eni, Statoil of Norway, and California-based Unocal, has said it will need hundreds of millions of dollars to help finance the construction of the three-billion-dollar, 1,750-kilometer pipeline.

The firm's chief executive, Sir John Browne, has previously referred to such funds as "free public money".

International financial institutions such as the European Bank of Reconstruction and Development and the Washington-based World Bank are expected to decide early this year whether to invest public money in the project.

Other potential backers of the pipeline include national export credit agencies from Japan, France, United Kingdom, Germany, and Italy.

The U.S. government has supported the project against criticism from some analysts, local communities and NGOs and also helped to convince local governments to approve the plan while promising to help find funding for the project.

Building of the Baku-Supsa section of the pipeline began three years ago.

Critics say that in its Azerbaijan section, the pipeline would largely follow the Kura River, but that BP has not provided reasons to justify such a precarious course.

"BP gives no data proving that this route is the best," said Manana Kochladze, Bankwatch's Caucasus Coordinator, in a statement. "When you're going to put an oil pipeline right next to a river, you better be able to show a good reason for doing so."

The pipeline also crosses a proposed national park (the Gobustan Semi-desert Sensitive Habitat) and a proposed World Heritage Site (the Gobustan Cultural Reserve, which contains rock art sites).

In Georgia, the pipeline would run through Borjomi, a protected area that includes a successful a mineral water company employing hundreds of people. They worry a pipeline in the area would pose a threat of oil spills, the report says.

It adds that BP rejected an alternative route because of its supposed proximity to "disputed regions", without specifying the regions in question.

The group also says the project does not comply with international social and environmental standards, charging that BP's environment and social research was "often unreliable" or "based on secondary sources."

Bankwatch says that BP's environment impact assessment, called Environmental and Social Impact Assessment (ESIA) Draft Report, for the Azerbaijan section of the pipeline does not comply with World Bank guidelines, generally thought of as a benchmark for environmental studies.

The ESIA was released in September 2002.

"This is a complex pipeline with incredible impact on the whole region, especially considering its connection with the development of Caspian oil and gas fields," said Kochladze. "The existing studies completely ignore this fact."

>From the time it hit the drawing board, the project, which will eventually transport one million barrels a day of oil from the Caspian, an inland sea whose shores also touch Russia and Iran, created a firestorm among environmental and social justice groups.

International and local NGOs, along with expert groups from various countries, including Georgia, Germany, France, and the Netherlands, voiced concern over the quality of the ESIA and public consultation processes.

In one case, BP distributed a mere 90-word pamphlet that could not outline project risks in detail, they say.

The groups are demanding that public agencies withhold financing until there has been a proper review of the ESIA and that any financial support from them should be conditional on first establishing credible oversight mechanisms guaranteeing transparency of the project.

Communities affected by Baku-Supsa cite other problems.

They complain that the construction destroyed roads that were not repaired, promises of permanent jobs never materialized and that they have yet to see any benefits from the pipeline's social funds and investment programs.

According to BP, the Community Investment Program aims to improve living conditions and access to basic needs, such as clean water, electricity, schools, health and sanitation facilities, by rehabilitating social and economic infrastructure.

Despite protests, the U.S. government, the main political backer of the project, is highly likely to continue supporting the project, Steven Mann, U.S. state department senior adviser, told reporters here recently.

The pipeline fits squarely into Washington's long-range policy of building a secure oil supply in Eurasia as it steers away from a dependency on Middle East oil, although the area contains only four percent of the world's reserves.

"Now that's not enough to dominate the market, by any stretch," said Mann. "It is enough to be an important part of setting oil prices on the margin, if you will, in the same way that North Sea oil did in the 1970s."

Mann said the project is "the centrepiece of what we call the east-west energy corridor." The United States also declared November's construction start of the initial phase of the BTC pipeline a success in its bid to obtain "world oil security."

Major oil companies have been lured to the area by its promise of profits and have made it clear that even if prices drop much lower than current rates, the BTC project will remain attractive.

The companies are putting up nearly three billion dollars for this oil pipeline.