BTC Pipeline

The Baku-Tbilisi-Ceyhan (BTC) pipeline is among the significant pipeline projects in recent times. The 1,768-km BTC pipeline will transport oil from the Caspian Sea to the Mediterranean Sea, passing through some of the hostile terrains in Azerbaijan, Georgia and Turkey.

The world is now looking to exploit oil reserves in difficult locations because traditional petroleum-exporting countries are finding it difficult to meet demand. The global spare oil production capacity has fallen steeply in the past few years. Oil reserves are concentrated in the Middle East while consumption is concentrated in North America, Europe and more recently, Asia. Oil, therefore, is transported across continents through tankers and pipelines such as the BTC Pipeline. According to US Energy Information Administration (EIA), oil tankers account for about two-thirds of the oil trade, which include both crude oil and refined products. The world, having run out of sources that can be transported through tankers, has now set its sights on oil reserves in land-locked areas.

The Caspian Sea is the largest land-locked body of water in the world, surrounded by Azerbaijan and Russia on the west, Turkmenistan on the east and Iran on the south. According to EIA, the proved oil reserves in the Caspian Sea lie anywhere between 17 and 44 billion barrels.

Though no formal agreement for the sharing of oil and gas reserves exists between countries surrounding the Caspian Sea, Russia, Azerbaijan and Kazakhstan are understood to have divided the northern 64%-share of the Caspian Sea into three unequal parts. While Kazakhstan got a 27%-share, the shares of Russia and Azerbaijan stand at 19% and 18% respectively.

Often the pipeline represents the only economical way of transporting oil from land-locked regions. The BTC Pipeline represents an attempt to transport oil from the Caspian Sea to the Mediterranean Sea, from where it will be transported to different parts of the world through oil tankers.

Location of the BTC Pipeline

The BTC pipeline starts at the Sangachal terminal near Baku and ends at Ceyhan terminal in Turkey. The BTC pipeline will receive oil from the Azeri, Chirag and Gunashli (ACG) offshore oilfields in the Caspian Sea. The ACG field reportedly contains about 5.4 billion barrels of oil. The ACG fields are controlled by BP through its subsidiary: the Azerbaijan International Operating Company.

The BTC pipeline project costs about US$3.7 billion, which is shared by a BP-led consortium. The share of BP in the project is 30%. Other significant stake holders include SOCAR the Azerbaijan oil company (25%), Statoil (8.71%) and Unocal (8.9%). The formal entity, which has built and will now manage the pipeline, is the Baku-Tbilisi-Ceyhan Pipeline Company. The BTC pipeline, officially inaugurated on May 25th 2005, will start transporting oil by the end of 2005, but peak volume of one million barrels a day will not be reached before 2008-09.

The 1,768km-long BTC pipeline will pass through Georgia (245km), Turkey (1,070km) and Azerbaijan (445km)—the balance 8km accounted by free area between countries. The BTC pipeline passes through some of the hostile territories and is exposed to terrorist attacks.

The BTC pipeline will fetch Azerbaijan revenues of about US$29 billion. Other key beneficiaries include Turkey and Georgia, which will earn revenues of about US$1.5 billion and US$600m respectively.