The Baku–Ceyhan oil pipeline: BP replies

A month ago Globolog first reported the concerns of international and local non-governmental organisations (NGOs) regarding a proposed oil pipeline known variously as AGT (Azerbaijan–Georgia–Turkey) and BTC (Baku–Tbilisi–Ceyhan). The pipeline would transport one million barrels of oil a day (mbd) from the Caspian Sea to world markets, passing through a highly sensitive region (see Beyond Pinnochio in the Caucasus).

What does BP say to the critics? Globolog caught up with BP’s Barry Halton, the consortium’s Regional Affairs Director, speaking from Tbilisi, the capital of the Republic of Georgia. Here are some of the key points in his reply. This is not a full record of the conversation.

Public purpose

NGOs say that it is impossible to justify public subsidy for a project that explicitly denies any public interest requirement. Halton says: ‘this is a misunderstanding of the clause [in the Intergovernmental Agreement]. BTC is simply a system for transporting oil. It is not a public utility in the normal sense and therefore the definition of public purpose as outlined in contracts that apply to utilities does not apply in this case.’

And anyway, says Halton, the NGOs miss a larger point. ‘The revenues that will accrue from the pipeline project are very much in the public interest. The benefits to Turkey, for example, will be enormous. There will be US $1.4bn in capital expenditure on construction, most of which will go to Turkish companies. Construction will create 5,000 jobs and there will be 300 longer-term jobs in maintenance. Turkey will get $300m a year in tariffs.’

There is, he adds, a ‘showstopper environmental benefit to this project. It will mean that the oil doesn’t have to go through the Bosphorus’, preventing another 1,000 tanker movements per year through this highly sensitive zone.

Poverty alleviation

The NGOs argue that the potential for exacerbating social divides as a result of unequal distribution of benefits is high. Halton counters: ‘The International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) will set requirements on the project in this regard. BP and its partners will play as positive a role as they can, but ultimately poverty alleviation is up to governments. Azerbaijan will receive US$20–40bn from the Azeri–Chirag–Gunashli oil fields in the Caspian Sea over the lifetime of the project. It is up to them to decide how the money is spent.’

Corruption

But Azerbaijan ranks as the world’s third most corrupt country according to Transparency International. Aren’t the NGOs right to claim that ‘widespread corruption is likely to result in revenues being creamed off or used for the benefit of the elite’?

BP and its partners are ‘very serious about transparency’ responds Halton. Take the Production Service Agreement (PSA) for the oil fields (which are by far the biggest source of revenue from the project – the pipeline is merely a transport system). Hitherto, PSAs have usually not been disclosed for reasons of commercial confidentiality, but in this case all the numbers will be made available. ‘Some 85% of the revenues from the oil fields will accrue to Azerbaijan, which is pretty standard around the world.’ The details are posted on a dedicated website.

Reviews and community involvement

NGOs have called on the UK’s Department for International Development (DFID) to delay a decision to extend funding to the project until reviews of revenue and tax arrangements and of macro-economic national and regional impacts have been undertaken, together with the agreement of social development programmes and the creation of an independent international advisory group. BP’s response? ‘This is rather insulting to the governments and others involved. The project has been under discussion for ten years. We’ve been working on the studies for at least two years. We have said to these NGOs: “work with us to make this something truly transparent. Your objectives are no different from ours. We want to see a fair distribution of revenues. We don’t want to see corruption or damage to the environment.” ’

Regarding social development programmes, for example, the project has a community investment programme and an environmental investment dimension. ‘We’re not ducking this issue,’ says Halton. ‘We are asking for ideas, advertising widely and requesting proposals from national and international NGOs for projects that will develop jobs, aid micro enterprises, improve water quality, increase access to energy and so on.’

The Host Government Agreements

A key concern for the critics is the Host Government Agreements (HGAs) between the consortium and the three countries on the pipeline route. Campaigner Nick Hildyard calls it ‘one of the most colonialist [agreements] I have ever seen.’

‘The campaigners put a very extreme interpretation on the HGAs,’ says Halton. ‘The governments in the region have carefully considered these matters. The aim of the HGAs is to protect an agreement already struck, not some sneaky way of extracting extra revenue. Companies like BP don’t behave like that. It would damage our reputation too much.’

‘But the HGAs are necessary from the consortium’s point of view because there are lots of examples where a deal has already been struck with a national government, but then a local authority comes along and tries to extract rents, rendering the whole project not viable. Companies need some protection from this.’

Consultation

One of the most eye-catching allegations from the NGOs is that the BP-led consortium claimed to have consulted with villagers in Hacibyram, one of several communities along the proposed route that lies deserted because of conflict between the Turkish government and Kurdish fighters. ‘Their point really is not the whole story,’ says Halton. ‘The villagers – a community of some 80 people – left during the 1990s because of the violence of the Kurdish Workers’ Party (PKK). It’s a sad fact that they had to abandon their houses. They still regard themselves as a community. We are in touch with those people and will see that they receive compensation.’

‘The route of the pipeline is 1,760 km, roughly the distance from London to Gibraltar. On that whole route, no one will have to move house because of our work. The pipeline is being buried a metre down. The disruption will be very small. We will reinstate the land, pay for any loss of crops for three years into the future. This is part of a package that goes far further than anything under existing Turkish law, where you are obliged to compensate landowners but not land users. Our view is that this is not good enough for our standards or to meet World Bank guidelines.’

‘Along the route (within a couple of kilometres on either side) there are around 750,000 people in 450 communities. We have consulted with at least two-thirds of those in Turkey and all of those in Azerbaijan and Georgia. The consultation we’ve undertaken in Turkey is unprecedented in its thoroughness.’

Climate change

Finally, argue NGOs, the project should not be undertaken at all because the extra oil it makes available will increase world emissions of greenhouse gases and add to the risks of climate change.

‘It’s true that BTC opens up a whole new oil province to the world market,’ says Barry Halton. ‘At peak, the pipeline will transport about one million barrels per day (total world consumption is currently around 76 mbd). That’s the business we’re in. If we walked away from BTC, another company would step in the next day. What would satisfy the NGOs? Provision of affordable energy also has implications for human rights. Azerbaijan, Georgia and Turkey badly need the revenue.’

‘We will operate the pipeline itself as efficiently as possible, in line with BP’s goal of reducing its own emissions. As far as we can see, the world will continue to need energy in the form of oil.’

Globolog has invited campaigners against the Baku-Ceyhan pipeline to respond to BP’s case on openDemocracy’s Corporations and Power discussion board. If you have any comments or questions please join the discussion.

Links

Information from the BP-led consortium on projects being undertaken to develop and export energy resources under the Caspian Sea, offshore Azerbaijan.

Memorandum From Concerned Non-Governmental Organisations regarding Developmental, Human Rights And Environmental Impacts Of The Baku–Tblisi–Ceyhan Oil Pipeline.

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