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."