### Baku-Ceyhan

The Baku-Ceyhan line is strongly supported by the Turkish and U.S. governments, but is questionable economically. A 1100-mile line to Ceyhan would have a total cost of over $4 billion with a cost per barrel of $2.44. Ceyhan does allow the use of Very Large Crude Carriers (VLCC), while Supsa and Novorossiysk are restricted to smaller LR-2 tankers by the need to exit via the Bosporus. With this estimate of costs, oil companies are insisting that any total transit costs over $3 per barrel (including pipeline costs, transit fees and risk insurance) be paid out of the host country's share.

Baku-Ceyhan (800 kb/d) | Cost / b
Lifting costs at AIOC | $5.00
Pipeline to Ceyhan | $2.44
Georgian Transit Fee | $0.43
Turkish Transit Fee | $1.50
Shipping to Rotterdam, VLCC | $0.76
Subtotal | $10.13

There are several problems associated with this route. It would traverse some areas of domestic violence spurned by the separatist Kurdish Worker’s Party (PKK). Currently, oil production in the Azeri fields is 75% less than projected, which, in combination with weakened oil prices, makes the Baku-Ceyhan line commercially infeasible. In order to achieve commercial viability an additional billion barrels of reserves must be added to the volume (probably from Kazakhstan) or an additional $1 billion must be given to the project.

Nagorno-Karabakh is also strategically important for a Baku-Ceyhan route. Concerns about Armenian terrorism would remain, as the Baku-Ceyhan route would also travel through territory inhabited by ethnic Armenians.

The U.S., Turkey, Azerbaijan, Georgia and Kazakhstan support a Baku-Ceyhan pipeline, as a Baku-Ceyhan line would be the first pipeline to avoid Russian influence. A terminus at Ceyhan would not increase traffic on the Bosporus, and has the advantage of a port that already has the technological and operational capacity to handle large tankers as a result of the Iraqi/Turkey pipeline. Thus, there would be no technological or environmental problems associated with expansion. The port of Ceyhan is also advantageous because the area has favorable weather conditions, and therefore can remain open almost 365 days a year (in contrast to Novorossiysk, which must be closed for up to 2 months per year due to storms and bad weather). Location is likewise advantageous, because Turkey is placed proximally to the growing markets in southern and Western Europe, which would make for easy and economical transportation. Turkey is attractive from a western perspective because the country understands the principles of western markets; hence, such a routing will reduce prospects for flow interference due to political factors.

Armenia’s exclusion under such a route, however, could prove troublesome. The tremendous increase in wealth of three countries on its borders, Azerbaijan, Georgia, and Turkey—two of which are Armenia’s enemies—would only anger Armenia and isolate the country even more. Further, Russia, in order to weaken Turkey, and angered by the fact that the MEP does not go through its territory, would continue to arm Armenia and the Karabakhis. Thus, a Baku-Ceyhan route could ignite an arms race in the Caucasus—something the United States wants to avoid at all costs.

If the chosen export route does not terminate at Ceyhan, new oil exports shipped from Black Sea ports will certainly add to the environmental risks of shipping oil through the Bosporus. Each 10 million-ton increment of Caspian oil shipped out to the Mediterranean will require eight hundred trips through the Bosporus by medium-sized oil tankers or two hundred trips by large tankers. Such increases in traffic will directly increase risk of acccident and impose additional waiting time on other vessels, including tankers, as the strait is intermittently closed to regulate traffic.

Baku-Ceyhan Links