TODAY.AZ / Business

UPI Energy: "Azerbaijan eyes the West"

26 June 2006 [21:09] - TODAY.AZ
This month's completion of the Baku-Tbilisi-Ceyhan oil pipeline from Azerbaijan to the Mediterranean Sea was celebrated like a debutante ball in the Azerbaijani capital, Baku.

Azerbaijani politicians and energy industry executives working in the country could realistically set their sights on Europe and the United States as potential customers for the first time, and there was no hiding their elation.

Greece and Italy were named future customers for BTC oil, and the notion that Azerbaijani natural gas would make its way to the East Coast of the United States floated around as well.

President Ilham Aliyev told the 13th annual Caspian Oil and Gas Conference, held in Baku in early June, that his country is about to become a major player in the world oil and gas markets and stands to bring in $140 billion over the next 20 years.

"Interest in Azerbaijan is rising very rapidly," Aliyev said, adding that the country is undergoing political and economic reforms and that its investment policies are "very open."

"We want to modernize and enrich our country, and we have all the opportunity to do it," Aliyev said.

Although much of the country's much-touted resources are still underground, the forecasts are optimistic.

For instance, the still-untapped Shah Deniz natural gas field, in the Caspian Sea off Azerbaijan's coast, has 40 trillion cubic meters to supply, the British company BP estimates.

"The (BTC) pipeline is to supply 1 million barrels per day, or 1.3 percent of the world's oil supplies," Asif Zeynalov, the manager of the terminal at the pipeline's starting point, told United Press International earlier this month. "In the coming years, it is to supply 25 percent of the world's demand growth," said Zeynalov, a BP employee.

BP has a strong presence in the country and manages the Sangachal Terminal at the BTC pipeline's start.

Much of the oil that will be pumped through the pipe comes from the Azeri-Chirag-Gunashli field off the Azerbaijan coast, BP said. Discovered between 1979 and 1987, drilling ACG is the joint project of 10 companies with BP as the largest stakeholder at 34.1 percent. BP estimates that ACG reserves are upward of 15.3 billion barrels of oil -- of which 5.4 are recoverable during ACG's PSA -- and that the field's lifespan will be more than 30 years.

Basically, "everywhere you open (the ground), you find (oil or gas)," Tal Rappoport of the energy engineering company Bateman Litwin told UPI on Sunday. Rappoport was on hand for the Caspian Oil and Gas Conference in Baku, and he said that the company was in "advanced negotiations with Azerigas on a very big project" that will allow the company to compress its gas and store it for the winter.

But the promises of sudden wealth are still largely unfulfilled, and for more than half of Azerbaijanis, they likely never will be.

"The country is split between those who benefit (from the growing oil and gas market) and those who don't, with a few more on the side of those who don't," Chuck Tripp, a professor of political science at Westminster College in Salt Lake City told UPI.

Tripp completed two research projects in the country, including one about the influence of Islam and mosques on the population. The problem with the sudden influx of Western money will not be an increase in radical Islam, Tripp said.

"It's never going to happen, ever."

Tripp cited the country's long history as a secular place, dating back to pre-Soviet Russian rule. Azerbaijan has seen an increase in the practice of Islam, but the mosque system is tightly controlled by the authoritarian government.

The real danger for Westerners trying to do business with the new self-proclaimed energy powerhouse is "the Aliyev patronage system," Tripp said. Aliyev came to power in 2003 in questionable elections, after his father, then-president Heydar Aliyev, suffered a massive and eventually fatal stroke. Heydar's portrait graces billboards at many Baku intersections, and many public buildings are already named after him.

"Money means everything" in Azerbaijan, Tripp said. Businesses must pay exorbitant government fees to secure permission to operate, and foreign businesses often support this system by paying top-dollar bribes, Tripp said.

"They have to pay off corrupt officials -- and that goes all the way to the president -- to get the contracts to explore for oil and gas," he said. "The verdict is still out on how much (oil and gas) the country actually has."

Of course, the more money foreign companies pay for licenses, the more the government will ask for in the future.

Engineering firm Bateman Litwin "(doesn't) come to fix the political situation," Rappoport said, when asked about dealing with corruption like Azerbaijan's. "That's their culture."

The company prides itself on understanding the local culture of its project sites and "knowing who to talk to," he said at another point in the conversation.

"I don't know what happens behind the scenes," he said of the corruption. "I don't think it's our business."

By Leah Krauss, UPI Energy correspondent



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