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U.S. Department of State

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U.S. Department of State
Office of the Spokesman
Press Statement

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Taken Question
May 24, 2000

Caspian Energy Developments

Q. Does the Department have any comment on developments related to Caspian Energy? Have the Baku-Tbilisi-Ceyhan Main Export Pipeline for oil and the Trans-Caspian Gas Pipeline stalled?

A. Quite the contrary, there is continuing movement forward on the east-west energy corridor concept. This is an idea honed not by the USG here in Washington but by the governments of the region. The Baku-Supsa and Baku-Novorossiysk pipelines are in operation. Similarly, construction continues on the CPC pipeline from Kazakhstan to Novorossiysk. The Baku-Tbilisi-Ceyhan oil pipeline, meanwhile, has made enormous progress in recent months and moves next week into the design and financing phase.

- We continue to work closely with the region's governments and hope progress on Baku-Tbilisi-Ceyhan will encourage renewed movement on the Trans-Caspian Gas Pipeline.

Q. What is the status of the Baku-Tbilisi-Ceyhan oil pipeline?

A. Framework documents for Baku-Tbilisi-Ceyhan are complete. The Turkish, Azerbaijani and Georgian Parliaments should vote on ratification of these agreements within the next few weeks.

- Oil companies from a range of countries (including the U.S.) that are operating across the Caspian region will meet on May 29 in Baku to begin discussions leading to creation of the Main Export Pipeline Company (MEPCO). It will be MEPCO's responsibility to complete engineering studies, arrange financing, and accumulate oil volumes for the line. We expect that MEPCO will authorize construction next year and that the pipeline will commence operations in 2004.

Q. What is the nature of Russia's involvement on Caspian pipelines?

A. We believe Baku-Tbilisi-Ceyhan should be a regional pipeline that provides a commercially attractive and environmentally sound export route for companies producing oil in Azerbaijan, Kazakhstan, Georgia, Turkmenistan, or Russia.

- As part of our multiple pipeline strategy, we have worked closely with Russia on several pipeline projects. However, we do not believe that monopolies, whether in production or transportation routes, make commercial or political sense. We will continue our active support of efforts by the countries of the region to secure an east-west export route for Caspian oil, which is based on an affordable tariff and which mitigates the environmental risk to the Turkish Straits of increased oil tanker traffic. We would welcome Russian companies to join these efforts as partners.

Q. Is the Trans-Caspian Gas Pipeline (TCGP) project dead?

A. TCGP has moved more slowly than some would have hoped. The private TCGP consortium (PSG and Shell), however, has presented a very attractive offer to the Government of Turkmenistan. Indeed, Turkmenistan will have seen from its negotiations with others that the terms for gas sales to Turkey via TCGP offered by both the Consortium and the Government of Turkey are highly favorable. It is worth noting that, while Presidents Niyazov and Putin agreed in principle on expanded Turkmen gas sales to Russia, the most difficult issue of price still remains to be concluded.

- Turkey has made clear that it wishes to purchase gas from Turkmenistan and Azerbaijan through a trans-Caspian pipeline project, and it is now for Turkmenistan to decide whether it will proceed with TCGP, and thereby secure access for its gas to Turkey's hard currency market. In addition, of course, Turkmenistan may choose to sell its gas to other markets. However, delay on TCGP will only benefit others competing for the Turkish market. We would anticipate that Turkey would take the steps necessary to assure its growing gas needs are met in 2002 and beyond.

- The United States, meanwhile, remains fully committed, politically and economically, to realizing a trans-Caspian gas pipeline that would address the supply needs of Turkey and the export needs of Turkmenistan and Azerbaijan.

- As President Clinton said in November and as our Caspian energy negotiator has said more recently, we would be ready to provide EXIM financing and/or OPIC political risk insurance in the context of a commercial deal. In particular, OPIC's political risk insurance would demonstrate that our commitment to the pipeline project would continue even after construction was completed.

[end of document]

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