High-stakes lure of bringing Caspian oil to consumers

Georgian officials see the future security of their small Caucasian nation to be part of the modern Silk Road pipeline that brings Caspian Sea oil riches to the West.

Today, major Western oil companies are taking a second look at what was for years dismissed as an unfeasible, "political" pipeline backed by the United States - meant to bypass Russia and Iran.

Their prospects revolve around a 1,080-mile pipeline that would bring Caspian oil from Azerbaijan's capital of Baku across Georgia to Turkey's Mediterranean port of Ceyhan. For Georgia, the package would yield an estimated 70,000 jobs, some $80 million a year in transit fees, and enhanced stability in an unstable region.

But the price tag is high and industry analysts warn that a slew of questions - from security concerns and cost overruns to finding enough oil to fill the pipeline - may keep the project on the drawing board. Still, it received a boost yesterday when major oil producer Kazakhstan signed a new protocol paving the way for possible use of the route, a critical ingredient for success, analysts say.

The Bush administration supports the pipeline - a cornerstone of former President Clinton's Caspian policy - and is considering ways to help finance it, says Elizabeth Jones, the president's special adviser on Caspian energy. But Spencer Abraham, the new energy secretary, last year called "the lure of cheap oil from the Caspian an illusion."

The five states that border the Caspian have not yet agreed how to share the sea's oil and natural-gas riches. Iran forced a delay in a key summit due to take place next week. President Mohamad Khatami is reported to have requested urgent oil talks first with Russian President Vladimir Putin.

Still, hopes have soared in the Georgian capital, Tbilisi, since eight oil companies led by British Petroleum-Amoco decided in October to begin a six-month, $26 million preliminary engineering study. A detailed year-long, $100 million study is expected to follow. Hopes rose further in mid-February, when US oil giant Chevron announced an interest in taking part in the second study. Chevron is already a major Caspian player, as half-owner of the company that operates Kazakhstan's Tengiz oil field and a 15 percent shareholder in a competing Kazakhstan-Russia pipeline due to open this month. Earlier this week, a BP-Amoco spokesman told Reuters: "We are supporting it, and we think it will be built."

"It's now becoming a more economic pipeline, not a political one," says Giorgi Chanturia, head of the Georgian International Oil Corporation. "Georgia considers this project the backbone of regional cooperation, the future for us, and a real guarantee of independence [from Russia]."

He recalls bringing oil executives to Georgia in 1994, when the country was torn by civil war. Lights at the airport were out; gunfire rattled in the background. "Then [the pipeline] was a fantasy," Mr. Chanturia says. "Now we have new realities." Among them is the discovery of the huge Kashagan offshore oilfield in Kazakhstan, which geologists reportedly consider to be one of the largest finds since Alaska's North Slope in the 1970s. Claims by local governments add up to one-third of global petroleum reserves, but more realistic estimates range from 4 to 8 percent each for oil and natural gas.

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