BAKU-TBILISI-CEYHAN BUILT BY 75%

75% readiness

Construction works within framework of Baku-Tbilisi-Ceyhan (BTC) oil line laying project are finished by 75%. David Woodword said that currently basic works are on in 17 building platforms through the whole BTC route between Baku (Azerbaijan) and Ceyhan (Turkey). Today the project employs over 21,000 people in the three countries of which about 4170 are in Azerbaijan and about 80% of these are Azerbaijan nationals.

By the week of the 8th August 1695 km of the construction corridor had been prepared across the three countries, with 1583 km of pipe placed ready for welding, about 1487 km of pipe welded, over 990 km of land trenched and about 875 km of pipe lowered in the ground. In total about 798 km is backfilled and reinstated over 310 km of land in the three countries. Overall BTC construction works are about 75% complete.

In Azerbaijan the pipe-laying is progressing in accordance with the construction schedule. Overall progress is 80% complete. The construction team successfully completed the hydro testing of first 47 km of the pipeline from the Sangachal Terminal to KP47. Good progress on major crossings continues to be maintained along the pipeline route. Of the total 443 km of the pipeline length in this country we have cleared about 427 km of the right of way (ROW), have strung about 425 km and have welded over 420 km of pipe. In addition, we have trenched about 300 km of land, lowered 285km of pipe in the ground and backfilled 262 km of land. Some 175 km of land has already been reinstated.

Presently constructors test the ready parts of the BTC oil line from the Sangachal terminal. Hydro testing has been successfully finished in the first 47 kilometers.

Construction activities on the BTC Head Pump station in the Sangachal Terminal are progressing on schedule with over 85% of the works already complete. The completed work includes pump foundation works and steel structure works for the buildings.

The fabrication works for the 14-meter high pump shelter building are nearing completion. The Central Azeri section of the BTC Head Pump station has already installed the first three main oil export pumps. Additional two pumps will be delivered to Sangachal this year for early installation as part of the BTC West and East Azeri works.

Civil and outfitting work continue at all Spie Capag/Petrofac joint venture facilities locations. Works at the Pigging Station (80% complete) and the Pump Station PS-A2 (40% complete) near Yaldilli in the Yevlakh district, and at the Intermediate Pigging Station IP-A1 (65% complete) near Kurdamir are progressing on schedule with 70% of the work for all the above ground installations in Azerbaijan already complete.

In Georgia the pipe-laying and pump stations are progressing in accordance with construction schedule. Overall progress is 74% complete. Of the total of 249 km of the pipeline length in this country we have cleared over 245 km of the ROW, have strung about 238 and have welded about 220km of pipe. In addition, we have trenched some 160km of land, lowered 142km of pipe in the ground and backfilled over 125 km of land. Over 55km of land has already been reinstated.

In July the consortium received official notification from the Georgian Ministry of the Environment of a two-week suspension of construction on a section of the Baku-Tbilisi-Ceyhan pipeline 15 km from Borjomi to allow the Georgian government to undertake a review of the security arrangements for the pipeline in the area. BTC complied with the notice, and agreed additional measures with the Government of Georgia to assure them of the security of the pipeline in this region. Construction work recommenced in Borjormi on 6th August.

In Turkey, BOTAS the Turkish state owned construction company continues to take actions to ensure an on-time delivery of the pipe-laying and pump stations construction activities. By the end of July the overall progress was 74%. BOTAS have cleared about 1,023 km of the 1,076 km long ROW strung about 920km and have welded some 850km of pipe. In addition, they have trenched some 534 km of land, lowered 448km of pipe in the ground and backfilled over 410km of land. About 83km of land has been reinstated.

The joint commission led by Azerbaijan's Deputy Prime-Minister Abid Sharifov and the Turkish Energy Minister Hilmi Guler continue to review progress of the Turkish section on a regular basis and agree recommended actions. As part of these reviews BOTAS committed to mobilizing an additional pipeline spread in Lot A near the Georgian border.

BTC is a major project, which will make a positive difference by bringing significant benefits to the region. By avoiding the Bosphorus it will help relieve the inevitable growth in oil related traffic and associated environmental risks, will create substantial revenues for the transit countries, and will help strengthen economic and political links between Azerbaijan, Georgia, Turkey and the West.

In the 4Q 2004 BTC will be ready for linefill' in Azerbaijan and Georgia, and BOTAS on-track for linefill 1Q05 will be completed by 90% in Turkey.

Third trench

The project has been spending $4 mln per day since the beginning of construction works, and this will keep on as well this year, until the pipeline construction finishes in the 1Q 2005. During the first six months the project spent $686 mln vs. the planned capital expenditures for 2004 - $1,371,000,000.

BTC Co. (BTC construction and employment operator) executive director Michael Townsend said that presently construction works within the Baku-Tbilisi-Ceyhan (BTC) project spent about $2 bn, while the volume of the contracts made under the project exceeds $2.7 bn.

According to Townsend, in September 2004 next trench under the loans allocated by international financial institutions on the BTC project is expected. "With account of the September trench it is expected to receive three trenches under the IFI loans", - he said. However he refused to sound the sum of these trenches.

As was informed earlier, total sum of the project involved loans, including loan interests will make $2.6 bn. BTC pipeline construction will spend totally $2.95 bn (the project's total cost is $3.6 bn, including loan interests and pipeline fill expenditures). BTC project loans are provided by four groups of borrowers. So, up to $250 mln - by international financial organizations - European Bank of Development and Reconstruction and International Financial Corporation (first group of creditors). Total loans of $936 mln - by the syndicate of 15 commercial banks, ABN AMRO, Citigroup, Mizuho and Societe Generale (second group). Thus $250 mln loans of the commercial banks are issued under EBRD and IFC guarantees and $686 mln - under guarantees of export and insurance agencies. The third group includes 8 export-credit agencies, which will give guarantees to commercial banks for financing material and equipment deliveries from six economically advanced states of the world (USA, Great Britain, Japan, Germany, Italy and France). From this group of creditors the Japanese Bank of International Cooperation will allocate $480 mln for the project. Besides 4 companies-project participants - BP, Statoil, ConocoPhillips and Total - will grant loans on total sum of $923 mln.

Situation in Georgia no

obstacle to BTC

Worsening of the situation for the Georgian-Ossetin conflict will not affect the construction of the BTC oil line, BP Azerbaijan president David Woodword said at press conference in Baku. "We control attentively the course of events in Georgia, and we have no ground to worry. We hope for peaceful settlement of the situation and do not expect any influence on the construction works, for the Southern Ossetia is located far from the BTC construction works corridor", - said D.Woodword.

At the same time head of BP Azerbaijan marked that "anyway there are opportunities to affect any situation".

Meanwhile, referring to the Georgian Defense Minister Georgiy Baramidzeh Georgian mass media inform that the president of Georgia has given all the necessary instructions in case of war break in South Ossetia. According to the Minister, Georgian armed forces are embattled and will act in accordance with the situation. "We are ready to oppose any forces, we have no way to recede to", - said G.Baramidzeh. He informed that presently the number of Georgian military subdivisions in the area of the conflict suffices to protect the Georgian villages.

On the other hand two criminals stole a bulldozer and excavator from the BTC construction site. Georgian legislative bodies have identified the criminals having stolen the bulldozer and excavator from the BTC construction site. The technique belonged to Spie Capag - Petrofac International Construction Company realizing BTC construction activities in Georgia.

Georgian MIA press service informed this to the Novosti-Gruziya. (Georgian News). "Two persons stole a bulldozer and excavator from the 90th kilometer of BTC construction site. The thieves were identified after inquiry - they were dwellers of the Gavazi village, Kvarel district, 20-year-old Kakha Matiashvili and 22-year-old dweller of the Chiatura district's center Alexander Gugunishvili", - the press service said. Presently the criminals and the stolen technique are being searched.

In interview to AT councilor of the US administration of the Caspian basin diplomacy Steven Mann expressed surprise of the recent stop of the oil line construction by Georgia. "It became a subject of extensive discussions during the last visit of the President Michael Saakashvili to Washington. Government of Georgia and BTC Co. have done much on the given issue. I am pleased with settlement of the issue, as you know, construction in the Georgian site of the pipeline is completely renewed", - the diplomatist added.

S.Mann said as well that the Baku-Tbilisi-Ceyhan oil line can not play a role in settlement of the Nagorniy Garabagh conflict. "These are different issues. Certainly, all of us would like to see the rapid settlement of the conflict and development of cooperation in the region. Nevertheless, the oil line reflects not political, but economic realities of the Southern Caucasus", - he said.

Oil traders "are counted in autumn"

As to the oil traders, next stage of negotiations between the Azerbaijan and Kazakhstan WG on Kazakhstan's joining to the BTC construction project will take place in 2 months, BTC Co. (BTC oil line construction and employment operator) executive director Michael Townsend said to journalists.

The given negotiations aim mainly at preparation of the draft intergovernmental agreement between Azerbaijan and Kazakhstan on Kazakh oil transportation via the Baku-Tbilisi-Ceyhan pipeline.

After the given draft agreement is coordinated at the level of working groups headed by the managing director of the NC KazMunayGaz JSC Kairgeldy Kabildin (RK) and SOCAR president Natig Aliyev, the document will be submitted to consideration of the two countries' governments.

Following signature of the given agreement, transit agreements will be signed between the Aktau-Baku system investors and governments of Azerbaijan and Kazakhstan.

"Negotiations with Kazakhstan companies on pumping of Kazakh oil via BTC keep on. The next Azerbaijan-Kazakhstan meeting on the given issue will take place in the nearest 2 months", - said Townsend.

Ambassador of Kazakhstan to Azerbaijan Andar Shukputov said that at the beginning of this year, when Azeri president Ilham Aliyev paid an official visit to Astana, he invited Nursultan Nazarbayev to Baku and the latter accepted this invitation. But as the political situation in the country somehow activated in autumn, the visit was transferred to the beginning of next year. Elections to the lower chamber of Kazakhstan parliament will be held in September 19.

Before head of the State Oil Company of Azerbaijan Natig Aliyev stated that the intergovernmental agreement between Azerbaijan and Kazakhstan on transportation of Kazakh oil via BTC pipeline "is already ready and will be probably signed soon".

A new oil storage and transshipment terminal in Kurik (port in 76 km southeast from Aktau), as well as connecting pipelines are supposed to build for creation of the Aktau-Baku system. The system's transshipment capacity will equal to 20 mln tons of oil per year, up to 7.5 mln tons will be transported at the 1st stage. The amount of investments will be specified after signature of the intergovernmental agreement. The new system will be built to the moment of First Oil production from the Kashagan field.

A separate company will be created for the Aktau-Baku system management. It will have four basic investors - ENI, TotalFinaElf, ConocoPhilips and Inpex participating in development of the Kazakh field Kashagan and having 15% individual shares in BTC Co (pipeline construction and employment operator).

As to the AIOC stockholding companies not joining BTC Co., negotiations on oil transit are conducted with the American company ExxonMobil, - said Townsend.

BTC excavations

The Institute of Archeology and Ethnography of the Azerbaijan National Academy of Sciences is running field research operations in the Tovuzchay cemetery in the territory of Tovuz area, where the BTC MEP is to be laid. Head of the department of the Institute Goshgar Goshgarli said the researches in this cemetery belonging to the late 2nd - early 1st millenium B.C revealed up to 30 cemeteries, plenty of material-cultural samples, as well as ornaments, spear edges, dagger etc. The revealed material-cultural samples will be extensively investigated.

The archeological excavations launched in 2003 by the Georgian-German expedition near the Tavskharo village, Dedoplisskharo area, Kakheti region located on border of Georgia and Azerbaijan revealed ruins of a city that existed in the VII century B.C. The ruins are fenced. Archeologists named the revealed wall designs "muruz-kalikus", i.e. "the crosswise stone". The subjects revealed in the territory of ruins testify of a high civilization. Made manually and on machine tools they speak about influence of various civilizations.

Let's remind that this ancient dwelling of people is located near the ancient city of Nekresi, which differs from Eastern Georgia for its material-cultural monuments of fire-worshiping. Archeologists prefer to investigate these ancient monuments in a complex way.

The archeological diggings in the Georgian site of the BTC oil line, near the Askuri village, Akhalchikhi area revealed three wine cellars of the ХII-ХIII centuries. The wine cellars are considered as church property. Skillfully made grape squeezing machines are found in the cellars built from tile. Head of the expedition Vakhtang Lichel said that the Askuri village was a religious center in southern Georgia and Georgians accepted Christianity for the first time exactly in this village.

The revealed wine cellars and machines testify there was a well-advanced branch of economy in Askuri - wine-growing and winemaking. Presently archeologists are searching for wine cellars in order to get additional information.

REFERENCE: BTC oil line is 1768 km long, of this in Azerbaijan - 443 km, in Georgia - 249 km, and in Turkey - 1076 km. BTC throughput capacity - 50 mln tons of oil per year. The pipeline is planned to finish in the 1Q 2005, the first tanker with Azerbaijan oil is planned to ship from the Ceyhan port in the 2nd half 2005.

The BTC Co. shareholders are: BP (30.1%); SOCAR (25.00%); Unocal (8.90%); Statoil (8.71%); TPAO (6.53%); ENI (5.00%); Total (5.00%), Itochu (3.40%); INPEX (2.50%), ConocoPhillips (2.50%) and Amerada Hess (2.36%). Cost of the construction is $2.95 bn.