BAKU (Reuters)–Governmen’s behind the BP-led Baku-Ceyhan crude oil pipeline signed $2.6 billion in financing agreemen’s with creditors on Tuesday and agreed to name the Azeri-Turkish link after the late Azeri President Heydar Aliyev.
Azerbaijan–Georgia–and Turkey signed four deals with oil firms–government agencies–and a banking syndicate to finance the 1,760-km (1100 mile) US-backed project–whose total costs rose by 20 percent from initial estimates to $3.6 billion due to interest and the expense of filling the line with oil.
"Today we have laid the financing basis for this project," said Ilham Aliyev–who succeeded his father Heydar as Azeri president in October. "International financial institutions have supported it–which was in effect the final step to realizing this project."
The Baku-Ceyhan pipeline–due to pump a million barrels per day of Caspian crude to the Mediterranean coast from April 2005–has been seen as a way for the United States to weaken Iranian and Russian influence in the oil-rich Caspian region.
Azeri and Turkish officials said the governmen’s had decided to name the pipeline in honor of Azerbaijan’s late President Heydar Aliyev–who died late last year.
Turkey also proposed naming the terminal at the Ceyhan end after the senior Soviet bureaucrat who stifled dissent and nurtured an ubiquitous personality cult–but is credited with bringing stability to the troubled ex-Soviet state.
Tuesday’s ceremony formally completed pre-arranged financing agreemen’s under which 30 percent of construction costs are covered by the pipeline shareholders–which include oil majors BP–ENI–Itochu–Unocal–Statoil–ConocoPhillips–and Total.
Remaining loans for the pipeline–which is already half-built–are provided by shareholders and banks.
BP–Statoil–Conoco–and Total will lend a total of $923 million–of which BP will put up $566 million. Japanese JBIC will lend $480 million–the European Bank for Reconstruction and Development and the International Financial Corporation will provide $125 million each.
A 15-member banking syndicate–led by Japan’s Mizuho–Societe Generale of France–Dutch ABN–Amro–and US Citicorp will lend a total of $936 million.
The project participants told a news conference they still estimated the pipeline’s net costs at $2.95 billion–but they will need another $250 million to buy the first 10 million barrels of oil to fill the pipeline. Another $400 million will be required to pay back interest on the $2.6-billion financing–which puts the total project’s cost at around $3.6 billion.
The group will start paying back the principal at the end of 2006 and will fully re-pay in 2015. The huge pipeline–whose return on investment is set at 15 percent–will deliver profits for the first time from 2024.