Hidden costs of pipeline meant to safeguard West's oil supply

["F A B I O C C H I::" <eco_fabiocchi at tin.it>]

Hidden costs of pipeline meant to safeguard West's oil supply
By Philip Thornton, Economics Correspondent
http://news.independent.co.uk/world/environment/story.jsp?story=535312
26 June 2004 


Where there's oil, there's trouble ­ and never has that been truer than today amid fears of a price surge that could pitch the world's economy back into recession. 

More than a decade ago the West, and particularly the United States, realised that it needed to guarantee oil supplies well into the next century in an increasingly war-torn world. 

And that was before Osama bin Laden threatened to take control of Saudi Arabia, the world's largest producer, and oil-rich Russia's government embarked on a plan to take control of its vast reserves. 

The answer was to cut out those two tinderbox regions by building a pipeline that would bring crude from the Caspian Sea to the Mediterranean coast and the safe hands of fellow Nato member Turkey. 

Azerbaijan and Kazakhstan, two former Soviet states that border the Caspian, between them have oil reserves three times the size of America's. The challenge was to find a secure way of getting the oil into the petrol tanks of gas-guzzling SUVs before oil shortages and soaring prices pushed the price of gas on America's forecourts to sky-high levels. 

By 2010 the Caspian region could produce 3.7 million barrels per day. This could fill a large hole in world supplies as world oil demand is expected to grow from 76 million a day in 2000 to 118.9 million by 2020. By this time the Middle Eastern members of Opec would be looking to supply half of that need. 

The answer was to drive a 1,090-mile, 42-inch wide pipe ­ the world's longest export pipeline ­ along a 500-metre-wide corridor from the Caspian Sea port of Baku in Azerbaijan to Ceyhan in Turkey via some of the world's most unstable and conflict-ridden nations. When it is complete next year, the pipeline will pump 4.2 million barrels a year, easing the US's reliance on the unstable Gulf states for oil. 

The project will cost up to $4bn (£2.4bn) and is being built by BTC, a consortium of 11 companies led by BP. Almost three quarters of the funding will come in the form of bank loans, including $600m from public bodies such as the World Bank. 

In the face of opposition from British pressure groups such as Friends of the Earth and civil rights groups such as the Kurdish Human Rights Project, BP set up an independent group, the Caspian Development Advisory Panel (CDAP). The panel, which included people such as Jan Leschly, a former head of SmithKline Beecham, and the former US Treasury under-secretary Stuart Eisenstat, raised concerns about the project at the end of last year. In their report they said they were worried whether Botas, the company awarded the contract to build the Turkish section, would meet its social, environmental and health and safety commitments given its "weak but evolving environmental and social compliance culture. 

"The panel heard concerns that Botas and its contractors might feel pressure to cut corners on environmental, social and technical standards to remain on schedule." 

It added: "The panel encourages BP... to use all its leverage, including stoppage of work, if necessary, to ensure Botas fulfils its commitments." But CDAP's concerns went wider, offering detailed advice on how to better protect human rights given that Azerbaijan, Georgia and Turkey have all recently seen "internal or external conflict". 

"The poor human rights record of host governments' security and military forces create a significant reputational risk for BP and BTC," it said. 

Objectors say the impact goes even wider. They say the threat is twofold ­ what happens if the pipeline goes wrong, and the destruction it would wreak even if it goes right. They say that the project will worsen the already polluted Caspian Sea, where sturgeon numbers are reckoned to be collapsing. In Georgia, the project will clear areas in two dense primary forests, cross the buffer zone of a protected natural park, and could badly affect several rare and endangered species. 

In Turkey there are more than 500 endemic plant species within the corridor, while a third of the country's globally threatened vertebrates are found within 250 metres of the corridor. 

The route crosses two sites protected under national legislation, including a wildlife protection area for the Caucasian grouse, a threatened species. There are two critically endangered plant species and 15 bird species with nesting pairs numbering 500 or less within the corridor. 

Campaigners say legal agreements make BP the effective governing power over the corridor, over-riding all environmental, social, human rights or other laws, present and future, for the next 40 years. Amnesty International says the consortium concluded an unprecedented agreement with the Turkish government which, it claims, would in effect strip local people and workers of their civil rights. And that's if the project goes to plan. 

If the project were to go wrong, for instance if an earthquake broke the pipe or the project fell into the hands of terrorists, the consequences would be far more serious. Turkey lies in an earthquake zone, with 17 major shocks in the past 80 years. Since the Baku line will be in place for some 40 years, there is a high chance of a major earthquake during its operation. 

The World Bank, the European Bank for Reconstruction and Development, Britain's Export Credit Guarantee Department and the World Bank's International Finance Company all carried out extensive assessments of the project before they decided to lend or underwrite money. 

The four whistleblowers who contacted The Independent all said the way the pipeline was being built failed all international standards. This included incorrect materials being supplied, work being started before the land had been surveyed, and the pipe installed before it had been inspected. 

Greg Muttitt, of the campaign group Platform, said: "Environment groups have raised concerns about the design of this pipeline for the past two years. What we are seeing now though is that the problems are far worse than we had imagined. This is a deeply flawed project. Now the banks, which ignored the warnings and financed the project regardless, have some serious questions to answer."