Georgians Set to Award Pipeline Study Contract

TBILISI, Georgia -- Georgia will announce the winner of a tender for a feasibility study on a pipeline to transport oil across its territory from neighboring Azerbaijan by September, the head of the Georgian state oil company said.


But Georgy Chanturia, president of the state-run Georgian International Oil Corp. said in an interview Tuesday that the company has already reviewed the bids and was leaning toward awarding the contract to Canadian engineering and construction firm SNC Lavalin International.


"I think it will be Lavalin," he said. "They made the best proposal. By September, we should know the final picture."


Other participants in the tender include the British firm Caffney, Cline and Associates, U.S. engineering firms John Brown and Gulf Interstate Engineering, and Ukrainian pipe-laying company Ukrgazproyekt.


Chanturia said Georgia received a $1.5 million loan from the World Bank to help pay for the feasibility study, which will examine possible pipeline routes for main oil production from three offshore fields in Azerbaijan's sector of the Caspian Sea through Georgian territory to the likely destination of the Turkish port of Ceyhan on the Mediterranean Sea.


The three fields -- Chirag, Azeri and Gyuneshli -- are being developed by an $8 billion international consortium, headed by the Azerbaijan International Operating Co., or AIOC. The group, led by British Petroleum and Norway's Statoil, is pushing hard to have the first oil flowing by Aug. 28.


AIOC has to make recommendations later this year to the Azerbaijani government on where it wants to build the main pipeline. Options include the proposed link to Ceyhan and a so-called Balkan route between Bourgas in Bulgaria and Alexandroupolis in Greece.


Early oil from Azerbaijani fields will be transported by two pipelines: the so-called northern route, an existing pipeline from the Azerbaijani capital, Baku, to the Russian port of Novorossiisk on the Black Sea, and the Western route, which will take the early oil from Baku across Georgia to an as yet unbuilt offshore terminal about 8 kilometers from the port of Poti on the Black Sea.


Chanturia said his company is pushing ahead with the reconstruction of the 380-kilometer Georgian section of the pipeline to carry the early oil from Baku to a Georgian port of Batumi, and it plans to have the work completed by the end of 1998.


The tender to refurbish the line was awarded in April to Austrian engineering and construction company McConnell Dowell. Chanturia said the total cost of the line upgrade, including refurbishment of both the Azerbaijani and Georgian sections of the pipe, would cost about $330 million, $30 million of which has already been spent.


GIOC plans to build a buoy-type oil loading terminal at Supsa some 3 kilometers away from the shore to allow loading of heavy tankers with up to 200,000 tons, Chanturia said.


"Our big advantage [compared with Russia's Novorossiisk] is that Supsa will be open 365 days a year," he said, referring to frequent storms on the Russian Black Sea shore that sometimes close the port for days at a time.


But the two pipelines designated to carry the early oil do not have the combined capacity to handle the main oil output when AIOC's production peaks at estimated annual 35 to 40 million metric tons by 2008.


Routing the main oil through the existing pipelines to the Black Sea also raises the issue of congested shipping traffic through Turkey's Bosphorus Straits. "The Bosphorus question is always there," Chanturia said.


Ankara has made it clear that it does not want any increase in oil tanker traffic across the Black Sea and through the straits, which it says could threaten maritime ecology near its capital, Istanbul. Instead, Turkey says it will back the Baku-Ceyhan pipeline project.


Azerbaijani President Heidar Aliyev has also said he favors the link from Baku to the Mediterranean to get the Caspian oil to market.