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. Last Updated: 07/27/2016

Azeris Tell AIOC to Pay for Overruns

LONDON -- The international AIOC consortium exploiting billion-dollar oil fields in Azerbaijan should pay for unexpected cost overruns of a new export pipeline, Azeri President Heidar Aliyev said Wednesday.

Aliyev, in London on an official visit to drum up investment, said at a conference that the multinational Azerbaijan International Operating Co. was responsible for overruns of about $275 million.

"The consortium AIOC was involved in this project and they are doing it. ... Now, based on additional research, it will come to $590 million. Well, that's their mistake," Aliyev said.

"AIOC has to decide where to get that money to finance it," he added.

The pipeline, which runs from the Azeri capital of Baku to the Georgian terminal of Supsa, will be "completed next year," he said, confirming the schedule announced by the AIOC.

The Georgia pipeline will be an important addition to a route through southern Russia which is already being used to export "early" oil production from the AIOC's offshore Caspian Sea fields to western markets.

Originally, the AIOC planned to do no more than repair an existing pipeline across Georgia, but in June the consortium said that costs were soaring, as large sections had to be completely replaced.

The Azerbaijani state oil company SOCAR originally agreed to compensate AIOC for the costs of the project, once the consortium's oil production moved into its "main" stage in mid-2001.

But Azeri officials insist that the agreement covered only the original $315 million budgeted.

Azerbaijan and AIOC have still not decided which route to use for the Caspian's "main" production. A new, heavier-capacity pipeline will have to be built.

AIOC groups 11 major oil companies with SOCAR to develop three off-shore oil fields with estimated reserves of 630 million metric tons of crude.