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. Last Updated: 07/27/2016

Turkey: Financing Found for Baku-Ceyhan Pipeline

ANKARA, Turkey -- A sponsor group led by BP has agreed on a plan to finance a pipeline project to carry 1 million barrels per day of Caspian crude oil to Turkey's southern coast, a Turkish energy ministry official said Tuesday.

The pipeline will stretch 1,730 kilometers from the Azeri capital Baku to the Mediterranean Turkish port of Ceyhan through Georgia's capital Tbilisi and has a price tag of about $2.9 billion.

"Between 20 percent and 30 percent of the cost will be financed by the sponsor group companies in cash," said a senior energy ministry official, who declined to be identified.

"The rest will be borrowed from international finance institutions, export credit agencies and commercial banks," he said.

The U.S.-backed pipeline project was masterminded by Turkey in the early 1990s to bypass its already busy Bosphorus straits, the only outlet at present for Russian and any other oil transported via the Black Sea.

The U.S. Eximbank, Japan Eximbank, International Finance Corporation and the European Bank for Restructuring and Development are among those interested in providing financing for the project, the official said.

"Even if there are delays in financial closure, the sponsors are determined to give notice to proceed in June," he said.

The project's current detailed engineering studies will pave the way for the construction, expected to start in June and estimated to last 32 months.

The project is sponsored by a group of international oil majors led by BP. BP holds a 25.41 percent stake in the group.

The sponsor group will conclude negotiations in the coming two or three weeks and will be reluctant to let in companies that do not comply with the agreed financing model, the official said.

"If new companies fail to join, the existing sponsors are willing to raise their shares," he said. "In that respect, TPAO may raise its stake up to 10 percent."