The Baku-Tbilisi-Ceyhan (BTC) pipeline will be a dedicated pipeline system to transport crude oil from the Sangachal Terminal near Baku in Azerbaijan, through Georgia to a new marine terminal at Ceyhan on the Mediterranean coast of Turkey. Tankers will then ship the oil to international markets. When the pipeline becomes operational it will be able to carry up to one million barrels per day (bpd) – the equivalent of 50 million tonnes per annum. The 1,760km pipeline is due to become operational in early 2005.

The BTC pipeline is a project of regional significance, as it will create much needed export capacity for the land-locked Caspian Sea oil fields. It also represents the first direct export route for Caspian Sea oil which avoids transport by sea through the Turkish Straits. The primary purpose of the pipeline will be to transport production from the new Azeri-Chirag-Gunashli (ACG) oil field lying offshore Azerbaijan, that has forecast reserves of 5.2 billion barrels.

The pipeline route passes through Azerbaijan for 442km, Georgia for 248km and Turkey for 1,070km, as illustrated in Figure 1.1. The pipeline will be constructed and operated to international standards, will be buried for its entire length and has been routed to ensure that no community, or single household, will need to be re-settled. The project has a design life of 40 years and is due to be commissioned at the end of 2004.

The countries of the Caspian region face severe economic problems including inadequate infrastructure and high levels of poverty. It is imperative for their developing economies that outlets to international markets are found for the abundant oil and gas reserves of the Caspian Sea.

Until now, countries such as Azerbaijan, which have oil reserves that far exceed their domestic requirements, have had to rely on a combination of pipelines, rail and shipping to export oil to world markets. A large percentage of these exports passes through the narrow and congested Turkish Straits, posing an increasing environmental and public safety risk to the city of Istanbul and surrounding areas.

The BTC pipeline offers a commercially viable and inherently safer means of transporting oil over large distances than existing infrastructure and facilities, as well as providing a means of relieving the growth of oil transportation through the Turkish Straits. Azerbaijan will derive substantial economic benefits through the generation of royalty and tax revenues, while Georgia and Turkey will derive important financial gains through transit fees.

These revenues, coupled with the indirect benefits associated with the purchase of local goods and services, employment, and specific programmes designed to encourage the development of small and medium-sized enterprises, have the potential to contribute to economic stability and development within each country, as well as promote regional integration and interdependence.

In addition to the BTC pipeline project, the South Caucasus Pipeline (SCP) is being planned to transport up to 7.3 billion cubic metres of gas per year from the Shah Deniz field offshore Azerbaijan. The SCP will take gas from the Sangachal Terminal, through Azerbaijan and Georgia to the Georgian/Turkish border, for onward distribution to Turkish customers via the national grid. The SCP will be constructed parallel to the BTC pipeline through Azerbaijan and Georgia. The SCP project, while sharing many similar features with BTC, has a different ownership structure, is operating to a different timetable, and will be subject to separate approval processes.