"ALL BANKS TO COME GUESTS TO US" BAKU-TBILISI-CEYHAN OIL PIPELINE FINANCING PACK OF AGREEMENTS SIGNED IN BAKU

Thus, paraphrasing the world famous phrase of Mayakovskiy "all the flags will be visitors to us" it is possible to characterize ceremony of signing pack of final documents on financing construction of the Baku-Tbilisi-Ceyhan oil pipeline (BTC) - the end of huge work on search and attraction of credit means in the unprecedentedly complex and not less successful construction project of the Baku-Tbilisi-Ceyhan oil pipeline with potential branch in the Kazakhstan port Actau. The process of financial assets distribution took much enough time, rates of its realization did not affect the honor of project participants, today the pipeline is already ready by over 50%. Baku-Tbilisi-Ceyhan construction is stipulated in the contract on prospecting, development and production share on the "Azeri-Chirag-Guneshli" deposits in the Azerbaijan sector of the Caspian signed under the direction of the ex-president of Azerbaijan Heydar Aliyev on September 20, 1994. Participating interests of BTC Co. are SOCAR (25%), BP (30.1%), Unocal (8.9%), Statoil (8.71%), TPAO (6.53%), ENI (5%), Itochu (3.4%), ConocoPhillips (2.5%), INPEX (2.5%), Total (5%) and Amerada Hess (2.36%).

February 3 ceremony of signing pack of final documents on financing Baku-Tbilisi-Ceyhan (BTC) oil pipeline construction took place at the "Gulistan" palace with participation of the president of Azerbaijan Ilham Aliyev. BTC financing agreements were signed by representatives of governments of Azerbaijan, Georgian Republic and Turkish Republics and BTC creditor reps.

The financing package includes 208 finance documents, with over 17000 signatures from 78 different parties, and it represents a major milestone in the implementation of the financing arrangements for the pipeline which will cost $2.95 billion to construct ($3.6 billion total project cost including linefill and loan interest during construction).

Approximately 30% of BTC costs are being funded by equity contributions by the project participating interests, while the remaining 70% of the total is being provided in the form of financing by third parties. The BTC partners have already contributed $1 billion. The total debt committed is $2.6 billion thus completing the funding for the project.

The group that will provide loans, export credits and risk insurance to BTC includes:

• Multilateral lending agencies: the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), the private sector arm of the World Bank

• Export Credit Agencies and Political Risk Insurers of seven countries: the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI) of Japan, Export-Import Bank of the United States of America, Export Credits Guarantee Department (ECGD) of the United Kingdom, Overseas Private Investment Corporation (OPIC) of the United States, Compagnie Francaise pour le Commerce Exterieur (COFACE) of France, Euler Hermes Kreditversicherungs-AG (HERMES) of Germany and SACE S.p.A.

• Servizi Assicurativi del Commercio Estero (SACE) of Italy syndicate of 15 commercial banks led by ABN AMRO, Citibank, Mizuho and SociОtО GОnОrale with Banca Intesa, BNP Paribas, CrОdit Agricole Indosuez, Dexia, HypoVereinsbank, ING, KBC, Natexis Banques Populaires, San Paolo IMI, West LB and Royal Bank of Scotland

• Loans provided by BP, Statoil, Total and ConocoPhillips, as senior sponsor lenders.

Finalization of the financing agreements took place after more than two years of far-reaching monitoring and scrutiny of the project's environmental and social impact, as well as a thorough public consultation process. The loans are conditional on the project continuing to meet its stringent public commitments which are subject to formal, quarterly audits by lenders. The participation of multilateral, export credit and insurance agencies enhances transparency in the project, and gives them the opportunity to influence project implementation, and to help ensure the development potential from the projects is realized. Today, construction work has progressed significantly with the overall project now more than 50 per cent complete. Some 760 km of the right of way (ROW) has been prepared, 580 km of pipe strung, 520 km of pipe welded, 270 km of the pipeline corridor trenched, 235 km of pipe lowered-in and 215 km already backfilled. Today, there are construction activities at 17 sites in all three countries.

Presently the pipeline employs more than 12000 people along its entire route from Baku to Ceyhan. The project's community investment programme is up and running in all three countries. Overall BTC together with the South Caucasus Pipeline (SCP) will spend some $30 million (including $5.5 million already awarded in Azerbaijan) on community and environmental investment between now and 2006 in Azerbaijan, Georgia and Turkey.

Acting at the ceremony Azerbaijan president Ilham Aliyev reminded that "ten years ago, September 20 1994 "The Contract of the Century" was signed at this very hall being of huge importance for the future of Azerbaijan". After the given contract was signed oil strategy of Heydar Aliyev started realization in Azerbaijan. This strategy run for ten years brought great successes for our country. Azerbaijan became stronger in economic relation, even more strengthened its independence.

Since 1994 Azerbaijan achieved great successes in development of its oil and gas deposits. Great work was done in the Azerbaijan sector of the Caspian Sea. Investments of billions of dollars were invested in Azerbaijan and in 1997 first oil was produced in "Chirag" deposit. Baku-Novorossisk and Baku-Supsa oil pipelines were put into operation that played a significant role in delivery of Azerbaijan petroleum to world markets. "Certainly, our common aim was that a big export oil pipeline was constructed in Azerbaijan that would in its turn allow us to get great oil production volume that is happening now", - emphasized Aliyev.

Realization of these projects is of great importance from the point of view of regional cooperation. It is a perfect sample of achieving the common purpose by three countries, foreign petroleum companies, more than 30 international financial structures.

Further oil and gas deposits of Azerbaijan will be used effectively. The question of realization of the "Shah Deniz" project also stands on the agenda of the day.

Aliyev noted fruitfulness of the activity of State Oil Fund of Azerbaijan. The means saved in this fund, considers Aliyev, are kept transparently and spent for improvement of the social status of refugees and IDPs - this is most painful problem of Azerbaijan.

This day - February 3 - puts last point in financing the export oil pipeline Baku-Tbilisi-Ceyhan, which will to a great degree determine future potential of Azerbaijan, - the president of Azerbaijan emphasized.

Then the ceremony of signing Baku-Tbilisi-Ceyhan project financing documents was held.

"Ratification instruments of the governments of Azerbaijan, Georgia and Turkey with government of the country with transit territory" were signed by: vice-premier Abid Sharifov on behalf of the Azerbaijan government, minister of power and natural resources Mehmet Khilmi Guler on behalf of the government of Turkey, president of the Georgian International Petroleum Corporation Georgiy Chanturiya on behalf of the government of Georgia, executive director of the company Michael Townsend on behalf of the BTC Co., executive director of Citibank (USA) Iskender Zaman acting on behalf of the first class creditors in the person of representative on guarantees on behalf of the Citicorp Trusti Company Ltd.

Ratification instruments recognize and confirm that the rights transferred to the BTCCo within frameworks of the "Agreements with government of the country with transit territory" signed by the governments of Azerbaijan, Georgia and Turkey on October 2000 and obligations undertaken by it concern the BTC project creditors and may be invested.

"Azerbaijan guarantee agreement" was signed by: vice-premier Abid Sharifov on behalf of the Azerbaijan government, executive director of the company Michael Townsend on behalf of the BTC Co, executive director of the Societe Generale Bank (France) Tyeri Barbiye acting as intercreditor agent on behalf of the first class creditors, executive director of Citibank (USA) Iskender Zaman acting on behalf of the first class creditors in the person of representative on guarantees on behalf of the Citicorp Trusti Company Ltd.

Government of Azerbaijan by this agreement gives the creditors of the first class guarantee under payment obligations, which can be paid by the AzBTCCo in connection with financing the BTC project and also SOCAR of the BTC Co. according to provisions of the agreement on transportation through the "Azeri"-"Chirag"-"Guneshli" deposits.

"The direct agreement upon agreement of the participants" was signed by: the president of the BP Azerbaijan company BP David Woodword on behalf of the BTC Co., president of SOCAR Natig Aliyev on behalf of the AzBTCCo. (Azerbaijan), executive director Michael Townsend from BTC Co., executive director of the SociОtО GОnОrale Bank (France) Tyeri Barbiye acting as intercreditor agent on behalf of the first class creditors, executive director of Citibank (USA) Iskender Zaman acting on behalf of the first class creditors in the person of representative on guarantees on behalf of the Citicorp Trusti Company Ltd, paymaster general of the BP group of companies Patrick Chapman on behalf of the BP Pipelines BTC Ltd. (United Kingdom), regional director of the company Arne Holdjem on behalf of the Conoco Phillips BTC Ltd. (USA), regional director of the company BP on behalf of the Company ENI BTC Ltd. (Italy), Pietro Kovana on behalf of the Inpex BTC Pipelines Ltd. (Japan), senior vice-president of Inpex Corporation Monuru Nagata on behalf of the Itochu Oil Exploration BTC Inc. (Japan) - president of Itochu Oil Corporation Masau Yamasaki, regional director of the Statoil BTC Caspian Ltd. (Norway) Georg Gundersen on behalf of that company, regional director of the company Jan Clod Navro on behalf of the company Total BTC Ltd. (France), president of the group on foreign projects of the TPAO company Ali Garagaya on behalf of the company Turkish Petroleum BTC Ltd. (Turkey), regional director of the company Michael Bariz on behalf of the company Unocal BTC Pipelines Ltd., financial director Fakhri dadashov on behalf of the company AmeradaHess BTC Ltd. (USA).

The given agreement in accordance with the agreement signed by participants of the BTC Pipeline Company on August 2002 determines pawn maintenance providing repayment of credit means, mutual rights and obligations, condition of rights transfer on share participation.

"Intercreditor agreement of first degree" was signed by: general executive director of the bank Yamada Takayuki on behalf of the International Bank of Cooperation, first vice-president of the bank Mrs. Norin Doyl on behalf of the European Bank of Reconstruction and Development, Chief of the department Shahbaz Mavadat on behalf of the International; Financial Corporation, director on oil and gas Roger Gotch on behalf of the Department of guaranteeing crediting on export operations (United Kingdom), executive director of Citibank Iskender Zaman on behalf of the Citicorp Trusti Company Ltd., executive director of the bank Tyeri Barbiye on behalf of the SociОtО GОnОrale Bank, executive director Richard Berret on behalf of the ABN Amro Bank (Holland), director of the department of bank Stephan Budrinskiy on behalf of the BNP Paribas Bank (France), executive director Keyzo Ogashi on behalf of the Mizuho Corporate Bank (Japan), executive director Tushita Randjan on behalf of the Citibank of North America (USA), executive director Richard Oliver on behalf of the Banca Intesa (Italy), executive director David Witch on behalf of the CrОdit Agricole Indosuez bank (France), executive director Patrick Blanshar on behalf of the Dexia Credit Local bank (Belgium), executive director Phillip Ramnitch on behalf of the Bayericsh HypoVereinsbank (Germany), executive director Michael Klemeyn on behalf of the ING bank (Holland), executive director Nil Morey on behalf of the KBC bank (Belgium), executive director Anton Dargniz on behalf of the Natexis Banques Populaires (France), executive director Herbinder Mudan on behalf of the Royal Bank of Scotland (United Kingdom), executive director Yevgeniy Pievskiy on behalf of the San Paolo IMI bank (Italy), executive director Harward Gruder n behalf of the West LB (Germany).

The given agreement regulates interrelations connected with granting credit means among the creditors.

Acting after the signing of documents Minister of Power and Natural Resources of Turkey Mehmet Khilmi Guler stated that Turkey came to a decision to name the Ceyhan terminal in Turkey after the respected Heydar Aliyev and put his name on record.

According to him, BTC project is a very important project signed by 78 parties, 49 documents have been signed on it. "As a person responsible for power sphere of Turkey I say: "we will finish it in due time and pass to the main stage. Let nobody doubt in it. This project will be completed in due time. in this connection we take serious measures", - minister noted.

Mehmet Khilmi Guler stated that within the "Shah Deniz" project framework to be realized after this, thanks to the pipeline to stretch from Baku through the territory of Georgia to Erzurum demand of Turkey in natural gas will be met and also blue fuel will be transported to Europe. In this relation Turkey signed agreement also with Greece. According to the given document on sale and purchase natural gas will be delivered from Greece to Italy. Within the framework of this project stipulating transportation of 11 bn c.m. of natural gas one more line will be laid from Greece to Austria.

Consequently petroleum in accordance with the Baku-Tbilisi-Ceyhan project will concentrate on the Mediterranean Sea uniting two seas by "the bridge of friendship". On the other hand, hydrocarbon reserves of this region will be delivered to Europe and finally, maybe all over the world by means of ships.

The president of the Georgian international petroleum corporation Georgiy Chanturiya noted the fact that today, after 16 months after September 18 2002 presidents of the Azerbaijan Republic, Turkey and Georgia together with the minister of power of USA have given solemn start to construction of the basic export oil pipeline Baku-Tbilisi-Ceyhan also testifies success of the BTC and BTE projects, it is already possible to say that construction of this pipeline is half completed.

The political changes occurred in Georgia are an extremely huge step made forward from the point of view of improving investment climate in the country. Georgia can actually and, what is especially important, in practice convince foreign investors and international financial organizations that Georgia will protect their interests and rights in the country. The new leadership of Georgia completely realizes that realization of favorable investment policy, involvement of foreign investments in the country are one of the important factors of economy revival. The fact that new government of Georgia unequivocally confirmed to investors of the basic export oil pipeline Baku-Tbilisi-Ceyhan and Southern-Caucasian pipeline from the moment it came to the power that it will support entirely the projects strategically important for Georgia and will completely execute the obligations undertaken by the countries stipulated by the international contracts also serves as acknowledgement of the above-stated.

Today Georgia is especially glad with that important decision was adopted to develop further the project of the Southern-Caucasian pipeline, petroleum companies have made a decision on authorization of financing the given project, contracts were made with Georgia on transportation of gas from the "Shah Deniz" deposit to Georgia, construction of some sites of the gas pipeline started within the framework of the power corridor.

Concerning development of regional cooperation Chanturiya noted that Georgia welcomes the fact that Greece and Turkey have signed the contract on construction of a connecting gas pipeline between them. This gas pipeline will allow transporting Azerbaijan natural gas from the "Shah Deniz" deposit to Greece and other European countries. Georgia is interested in transportation of the Caspian gas to Europe, as it will supply max loading of the Baku-Tbilisi-Ceyhan gas pipeline and increase the strategic importance of the South-Caucasian region for Europe.

Georgia attaches great importance to more active participation of Kazakhstan in the projects of the East-West power corridor with the purpose of transporting Kazakhstan petroleum by the BTC pipeline. We hope that with assistance of USA the government of Azerbaijan and Kazakhstan can in near future finish work on registration of intergovernmental contracts.

Ukraine joining to realization of regional projects is also one of major issues for Georgia. Active efforts must be made on using capacity of the Odessa-Brody-Gdansk oil pipeline and transportation of power carriers to Europe through the given oil pipeline.

Acting at the ceremony ambassador of USA on power diplomacy of the Caspian pool Steven Mann noted that last decade new stages of development were observed in the Caspian region, and Azerbaijan is the country among going one of the first in this development. Baku-Tbilisi-Ceyhan oil pipeline making basis of the East-West power corridor covers most part of all these projects. The ceremony proves support of the BTC project by the international financial community.

International creditors have put huge efforts in realization of this project, displayed high professionalism. They have one purpose, which, first of all consists in opening horizons of economic development to the people living in these countries. The ambassador expressed hope that next year it will make congratulations already in Ceyhan. Kazakhstan, as well as Azerbaijan is a country with rich hydrocarbon resources, ambassador of the Republic of Kazakhstan to Azerbaijan Andar Shukputov stated acting at the ceremony. He said the confirmed stocks of hydrocarbon in Kazakhstan total about 4 bn tons of petroleum and 2 trn c.m. of gas. Volume of petroleum production is also growing. If in 2002 47 mln tons of petroleum and condensate were produced, last year this parameter was more than 50 mln. The basic strategic tasks of Kazakhstan in this area found the reflection in the state program on development of the Kazakhstan sector of the Caspian Sea. Its performance will allow finishing production volume by 2010 up to 100 mln tons, and by 2015 to get to the level of 150 mln tons. Such a scale project as Baku-Tbilisi-Ceyhan in which participate several brotherly states, and which is as we today were once again convinced supported by international financial organizations and authoritative banks, can be of interest also for Kazakhstan. It reminded that in November 1999 Kazakhstan together with Azerbaijan, Georgia and Turkey signed the Istanbul declaration on support of the given project. It is impossible to miss also the fact that the number of shareholders of this consortium includes some companies working in the Kazakhstan sector of the Caspian shelf, possessing in total 15% shares.

Besides the cooperation prospect in the given area now finds expression in the negotiation process with the purpose to develop appropriate legal space and specifications for transportation of the Kazakhstan petroleum by the system of Baku-Tbilisi-Ceyhan. The ambassador expressed confidence in rapid and successful completion of negotiations on this question to open new horizons for cooperation.

Acting at the ceremony president of the Azerbaijan International Operational Company (AIOC) David Woodword reminded that basic charges of the project total $2.95 bn, and including also cost of petroleum to fill the oil pipeline, credit percents on the during construction and financing charges - $3.6 bn.

Approximately 70% of this sum, or $2.6 billion dollars are taken as debt, thus $1.6 bn is provided in the form of financing beyond the third parties. All of them are international banks, or international financial institutions recognized at the international level. as to the remaining $1 bn it is provided by some petroleum companies participating in the project.

As to the project, important progress is achieved in works run in 17 building sites in territory of all the three countries. Generally, over 50 percents of works on the project are already completed, approximately 780 kilometers in the pipeline with total extent of 1760 kilometers are cleared for the building corridor, pipes are welded in 540 kilometers. Despite of expected hearings and versions, works proceed that the pipeline accepts first oil in accordance with the diagram - early 2005.

More than 80% of works on the first phase of the full-scale development project of "Azeri-Chirag-Guneshli" deposits are already completed, and the project confidently advances to the purpose - production of first oil at the beginning of 2005. The basic jacket of the Central Azeri platform will be established in the forthcoming 1-2 months. Works on topsides advance well, lining of a 30" underwater oil pipeline is completed. Expansion of the Sangachal terminal goes under the schedule. Thus, petroleum to fill BTC and allow starting payment of duties is already on the way.

"Shah Deniz" project successfully keeps on after the sanction issued about a year ago. The given project will export gas through the South-Caucasian pipeline to pass by the power corridor East-West in parallel with BTC. The project successfully advances under the schedule to deliver gas to the markets of Azerbaijan, Georgia and Turkey by the third quarter of 2006.

Currently BP company cooperates with more than 500 local companies. Approximately 30% of the total expenditures - more than one billion dollars were spent in Azerbaijan in 2003. In 2004 it is considered to even more increase this parameter to create workplaces and business- opportunity for the local population. The Business-Center has played a significant role in achievement of these successes.

The Bank of the International Cooperation of Japan two years ago adopted the address in connection with the Baku-Tbilisi-Ceyhan project, general executive director of the Bank of International Cooperation of Japan Yamada Takayuki stated. "This project is very attractive and perspective. But there were also those who did not trust in its financing, as the scales of the project were huge", - he noted.

Together with BTC representatives the sponsors, creditors, everyone feel here a huge pride and satisfaction. The financial maintenance for the project will be presented in time. Construction of the pipeline by 1760 kilometers extent requires, certainly, much time. And this in certain degree creates opportunities for investors financing the construction. Transportation of raw petroleum by such an extended pipeline is a very important issue for the sponsors. The creditors have achieved arrangement that the project will be realized in time, give its fruits.

After the completion of this oil pipeline the three countries having signed intergovernmental agreement will put among themselves the base of maintaining political and economic stability in the region. He expressed hope that intergovernmental contract will allow that financial grants managed to execute this project in time. That after construction of the oil pipeline it was possible to deliver petroleum to world markets via it.

The BTC pipeline and "Azeri"-"Chirag"-"Guneshli" oil deposits should become one of new and important sources power carriers for Europe, which can ensure stability and already today is the largest project of industrial construction. The first vice-president of EBRD Mrs. Norin Doyl stated this. She said when the sponsors of the project addressed to EBRD with the request for financial resources, EBRD regarded this complex project as an opportunity to give the population of the region a real hope. If the pipeline is laid and maintained under the highest standards, for EBRD it will become an opportunity to ensure economic development in three countries of the region, through which it will pass. In this respect EBRD can strengthen efficiency of the project due to experience of the 12-year work in the given region. For achievement of the purpose EBRD has developed three criteria of estimation of the project - to convince the Board of Directors that the project will be safe, meet the interests of population on practice and to have stable economic benefit. Now, in two years, EBRD was convinced that the BTC project meets all the criteria. The BTC pipeline is under construction at observance of the latest norms of environmental protection, protection of health and safety precautions on manufacture. It is characterized by max level of safety, newest technologies and other systems of accident precaution. All this will allow reducing scales of damage in case of emergencies.

In world practice there are very few projects raising such hopes as the pipeline Baku-Tbilisi-Ceyhan. These words belong to the deputy director of the International financial corporation Shahbaz Mavadat.

22 international petroleum contracts were signed with the purpose of delivering petroleum and gas resources of Azerbaijan and Caspian Sea to the world market in a historically short interval of time. President of the State Oil Company of Azerbaijan Natig Aliyev stated this. For today more than 31 mln tons of petroleum have been produced in the Chirag-1 platform, a great work will be carried out on full-scale development of "Azeri"-"Chirag"-"Guneshli" deposits. At the end of this year first oil will be produced in the central part of the Azeri deposit. Central Azeri platform will have 48 wells, technical pro cessing of 400 thousand barrels of raw petroleum a day will be possible here. Now in Azerbaijan piles and basic plate are established the basic jacket. The drilling rigs are constructed and delivered to Baku from France, Poland and Norway. Assembly and installation of incorporated drilling dwelling bloc and production platform are carried out in Azerbaijan. In connection with production of first oil in the Central Azeri platform the underwater 30" oil pipeline by extent of 187 kilometers is completely laid up to the coast, and construction of a 28" gas pipeline is expected to complete at the end of the first quarter of this year. At the Baku deep-water bases plant construction of top modules of the Azeri platform is executed by 70 percents, and on July this year mounting them to the basic jacket will be finished. The development of Azeri deposit will become full-scale after construction of the West and East platforms. It is expected that first oil in the Central Azeri will be produced at the 4th quarter of 2004, in the Western Azeri - at the 2nd quarter of 2006, and East Azeri - at the 2nd quarter of 2007.

The terminal constructed in Sangachal will become one of the largest of such terminals in the world. Construction works connected with expansion of the given terminal started on January 2002. After these operations are finished, the terminal will cover 540 hectares, it will be possible to carry out here storage and technical processing of 1.2 mln barrels raw petroleum daily. Presently stipulated works have been executed by 80%, in the third quarter of this year the terminal will be ready for operation.

One of the major components of new petroleum strategy is promotion and realization of the idea of lining Baku-Tbilisi-Ceyhan export pipeline. The given project is the basis of power corridor East-West and one of the largest projects carried out in Azerbaijan in the XXI century. Namely Heydar Aliyev was the main architect of this project, he put its basis, personally supervised over its realization. The oil pipeline Baku-Tbilisi-Ceyhan is an engineering structure with no analogue in the world. 443 kilometers of the pipeline by total extent of 1762 kilometers will pass through Azerbaijan, 249 kilometers - through Georgia, and 1070 kilometers - through Turkey. The project alongside with lining of the pipeline provides expansion of Sangachal terminal, construction of the new huge terminal meeting modern standards, and also 8 pump stations in the Ceyhan port.

The states interested in development of hydrocarbon resources of the Caspian, development of oil and gas deposits and delivering them to the world market, companies engaged in this business were already convinced of necessity of the Baku-Tbilisi-Ceyhan export pipeline. Now the company BTC Co has 11 shareholders from which 4 - Total, Inpex, Agip, ConocoPhillips - run petroleum and gas operations in the northeast of the Caspian Sea and represent Kazakhstan. 520 kilometers of pipes, including in the Azerbaijan site - about 200 kilometers (45 percents of general extent), in Georgia - about 100 kilometers (40 percents), and in Turkey - 225 kilometers (21 percents) were welded along the corridor of the Baku-Tbilisi-Ceyhan pipeline since the beginning of construction work. The necessary measures on acceleration of operations are stipulated. Now annually 4 million dollars are spent on construction, such financing will proceed during this year. On January 1, 2004 about $1.5 bn was expended under the project, and the sum of $2.6 bn is prepared being a part of the total budget of $2.95 bn. The plan and process of financing the BTC pipeline was signed by experts commission ("Lazard", "Sallivan Kromvel", bp, "Staoil", "Yunokal", SOCAR).

Thus, the participants finance $1 bn from the project charges at own expense, and $2.6 bn by means of expenditures to involvement of credits (credit sum increase at $200 mln is carried out to create additional reserve means for the participants).

The involved credit means at the sum of $2.6 bn were given by three groups of creditors: $500 mln by the International Financial Corporation and European Bank of Reconstruction and Development, $1 bn 166 mln - export credit agencies representing 6 countries, and $923 mln - companies-sponsors of the project (BP, Statoil, ConocoPhillips and Total). Means for the sum of $936 mln were involved from the bank market under the guarantee of international financial organizations and export credit organizations. The given means are presented by syndicate in the structure of 15 commercial banks representing 8 countries of the world.

Journalists were informed at the press conference that BTC Co. intends to receive first tranche of about $1 bn within a credit pack of $2.6 bn signed on March-April. Mainly, it will be spent for repaying own finances of project shareholders i.e. interval financing that were transferred till receiving of international crediting. BTC Co. Executive-Director Mike Townsend informed about that at yesterday's press-briefing which took place after ceremony on signing of credit agreement. All the remaining finances will be received of 3-4 tranches by late construction line, i.e. early 2005.

Conditions of loan receiving are commercial secret, but for common perception at press-briefing it was informed that usual interest on such loans makes libor + $3.5 and are allocated for 10-12 years. Repayment of loans and interests will start at the 3rd quarter of 2003 and will be fully returned in 2015. In 2020-24 the pipeline will commence to bring a profit to shareholders. More precise figures on loan allocation was introducedat the press-briefing. In particular, it was known that Japan Bank for International Development expending $480 mln became the largest creditor among export-credit agencies and insurance companies. At all, commercial banks have extended $936 mln. Own finances of IFC and EBRD made $250 mln. BTC four shareholders have disbursed $923 mln, of them BP allocated $566 mln, Statoil - $193 mln, Total - $109 mln and ConocoPhilips - $55 mln. Commercial banks have extended loans under guarantees of export-import agencies and insurance companies.

Till first loan tranche, i.e. until March-April, SOCAR should invest $180 mln-$190 mln for pipeline construction. According to State Oil Fund head Samir Sharifov SOCAR will not have any problems with interval financing. "Bridge loan" received from project's partner will be used for this purpose.

Signing of common credit agreement ifs of great importance for Azerbaijan unable to receive necessary loans independently on equal terms with project's participating interests. In fact, any way Azerbaijan should be forced to introduce the state guarantees to international lending organizations.

Besides, in summer, 2001 2 mln barrels of future oil of SOCAR from ACG was transferred to three shareholders of project in order to enlist their guarantees.

The construction design of the Baku-Tbilisi-Ceyhan oil pipeline should be completed at the end of 2004, despite of recent data on delays at the Turkish part of the pipe, said the head of consortium on BTC construction Michael Townsend. "I am sure that BTC can deliver the first oil from the Azerbaijan deposits Chirag-Guneshli in 2005, - Townsend said. - It is inevitable that at construction of an oil pipeline of such huge length, some sites will be formed faster than others, and recently there were really some delays for the bad weather and winter colds". "Nevertheless, we have enough equipment and personnel to ensure completion of the pipeline in the nearest 12 months", - he noted.

The oil pipeline, originally considered competitor of the route of petroleum deliveries from Russia and Iran, now is actually named the only possible way of export from remote other ways of the region. It means also actual victory of the USA, which has always supported the idea of constructing Baku-Tbilisi-Ceyhan in an attempt to lower influence of Iran and Russia in the Caspian region rich with petroleum. Petroleum will go to the West via the oil pipeline from ACG Azerbaijan deposits and - potentially also from the great Kazakhstan deposit Kashagan. Townsend said that Azerbaijan petroleum is enough to fill the pipeline, but noted that initially there may be reserve capacities, though the general capacity of the Baku-Tbilisi-Ceyhan may be increased by third by adding the agents lowering hydraulic resistance. "In any case the final development of Kashagan is improbable till 2006/07, so we have time to look", - he added.

Mass media representatives were also informed that the end of financing agreements as a result of wide monitoring going on for over two years, attentive study of influence of the project on environment and social sphere, and also all-round consulting with the public was achieved. The debts are given with the condition of strict performance of the project, public obligations. It will be checked as annual official audit is realized by creditor structures.

The participation of agencies under the multilateral, expert credit and insurance raises transparency in the project and allows them to affect performance of the project, and also promote maintenance of realizing development potential following from the project.

Construction of the Baku-Tbilisi-Ceyhan oil pipeline began in the third quarter of 2002, and early 2003 first pipes were delivered to Azerbaijan, and practical work started. For today about 760 kilometers of a building corridor is prepared, 580 kilometers are built and 520 kilometers of pipes are made. The trench of 270 kilometers extent is laid, tranche of 235 kilometers of pipes is laid, 215 kilometers filled by soil. Construction proceeds in 17 building sites of all the three countries. Due to realization of this project thousands of new workplaces were created. The prepared program of public investments of the project is carried out in all the three countries.

At the stage of construction appropriate indemnification were given to the landowners and land tenures for using the ground. After construction they can use the lands, except for some restrictions included for safety precautions.

Further it was marked that one more agreement is coordinated with the companies "Yunokal", "Statoil" and "Delta Hess" on financing the first phase of "Azeri"-"Chirag"-"Guneshli" deposit development. The documents ensuring credits represented by the International financial corporation and EBRD for the sum of $120 mln have come into force also.