CAPITAL: ANKARA
MONETARY UNIT: LIRA
REFINING CAPACITY: 694,115 B/CD
OIL PRODUCTION: 57,000 B/D
OIL RESERVES: 295.7 MILLION BBL
GAS RESERVES: 310 BCF

The leading project in the race to establish a primary oil export route out of the Caspian region moved forward with the signing of an agreement by a consortium of eight companies to cover financing and preliminary design of a 1,700-km trunkline from Azerbaijan to Turkey.

The proposed 42-in. pipeline, dubbed the Main Export Pipeline (MEP), would follow a route from the Azerbaijani capital, Baku, via Tiblisi in Georgia, and on to Ceyhan on the Mediterranean coast of Turkey. It would have capacity for 1 million b/d of oil.

Statoil AS, BP, State Oil Co. of Azerbaijan Republic, Itochu Corp., Turkey's TPAO, and Delta/Hess (Amerada Hess Corp. and Delta Oil Central Asia Ltd.), Unocal Corp., and Ramco Energy PLC of the US each became party to agreements inked earlier to cover transit across Azerbaijan, as well treaties regulating the pipeline's route through Georgia and Turkey.

The deal cleared the way for development of BP-led Azerbaijan International Operating Co.'s Azeri-Chirag-Guneshli (ACG) fields.

Flow from the ACG fields, brought into early production in 1997, was expected to increase in late 2004 from an initial rate of 400,000 b/d.

A staged development at the three-field complex, which was thought to contain 4.6 billion bbl of oil, aimed to ultimately raise production to between 800,000 and 1 million b/d.

Wood Mackenzie said the plan to build MEP by 2005 was threatened by cost estimates soaring to $3-4 billion and a scarcity of financial backers.

"Finding willing financiers for the project is problematic, given the modest oil reserves discovered to date in Azerbaijan and the lack of committed volumes from Kazakhstan," it said.

MEP needed to transport 5-8 billion bbl, depending on the tariff, to reach profitability, according to Wood Mackenzie. Under the "most optimistic scenario," this means 4.2 billion bbl could come from the ACG fields, although AIOC, having already invested in the Baku-Supsa pipeline project, the so-called "western route," would likely want a return on its investment and would commit only 2.8 billion bbl.

Wood Mackenzie noted Russia's Lukoil, a 10% shareholder in ACG, planned to export its share of production to Novorossiisk, cutting committed ACG crude to 2.5 billion bbl.

Some oil companies argued the $2.4 billion pipeline would be too expensive, but Turkey pledged to cover any expenses above $2.4 billion.

Botas Petroleum Pipeline Corp. was named to lead the expected 5-year construction of the 1,080-mile pipeline. Botas awarded Pipeline Engineering GMBH, Essen, a contract to design the Turkish section.

If an oil export pipeline were not built, the International Energy Agency said oil exports through the Black Sea could see potential shipments of 2.3 million b/d by 2005, up from 1.4 million b/d in 2000.

IEA said the Turkish straits could handle no more than 1.8 million b/d. "Alternative routes will have to be found," it said.

Gas projects

Participants in the Blue Stream Caspian Sea gas pipeline project planned to begin construction in 2001.

The pipeline was a rival to the Trans-Caspian Gas Pipeline (TCGP), which would export Turkmen and Azeri gas to Turkey.

The project involved laying a subsea pipeline, renovating and adding compressor capacity to an existing 490-km pipeline from the Baku area to the Georgian border, and laying a 280-km line across Georgia to Turkey. That pipeline would have a capacity of 5 billion cu m/year, rising to 16-24 billion cu m.

A group of oil companies operating in Azerbaijan agreed to provide $500-700 million toward the estimated $1.5 billion construction cost.

In late 2000, Turkey agreed to transport Egyptian natural gas through its pipelines to western Europe.

The agreement paved the way for an export agreement under which Egypt would export 5 billion cu m/year.

The gas would also pass through Greek territory in pipelines that also would carry gas from Central Asian countries to Europe.

Egypt was looking at three options for getting its gas to Turkey. One was to build a pipeline from the Egyptian port of Taba on the Gulf of Aqaba through Jordan and Syria. A second was to build an undersea pipeline from Al-Arish in northern Sinai to Turkey's southern coast. A third was to liquefy the gas and to ship it in tankers to the Turkish port of Izmir.

Realignments

Turkey's High Privatization Council approved the sale of 51% of Petrol Ofisi AS, the country's largest gasoline retailer, to Turkiye Is Bankasi AS and Dogan Holding AS for $1.26 billion

Turkey planned a further share offer in majority state-owned refiner Tupras in early 2001.

The sale of dozens of state-owned companies was the backbone of Turkey's 3-year inflation reduction program, which was backed by the International Monetary Fund.

A group led by Turkiye Is Bankasi bid $1.16 billion for the Petroll stake before the sale was aborted in 1999 because of corruption allegations.

Petkim Petrokimya Holding AS, Turkey's largest petrochemical company, planned to invest $400 million to upgrade its production facilities over 3 years.

The investments would focus on the company's Aliaga complex near the western city of Izmir. Meanwhile, the company shut half of its 18 plants in its Yarimca complex near Istanbul because they were uneconomic.

Madison Oil Co., Dallas, Tex., acquired BP subsidiary ARCO Turkey Inc. for an undisclosed sum.

ARCO Turkey had 19.6% working interest in Cendere field in south-central Turkey. The field, operated by Turkish National Oil Co., had produced 12.7 million bbl and was making 2,600 b/d of oil from 13 wells, or 540 b/d net to ARCO.

Madison Oil, formerly Trans-Dominion Energy Corp., had an interest in 2.1 million acres in four geologic provinces in Turkey and a 12.5% royalty interest in Zeynel oil field in southeastern Turkey's Gaziantep region.

Discovery

A gas-condensate discovery west of Istanbul in the Thrace basin of European Turkey was believed capable of producing at rates far higher than the 12.4 MMcfd tested.

The operator, Amity Oil NL, Perth, a 50:50 partner with Turkish Petroleum AO on License AR/AOI/3589. The company said reserves would be 70 bcf if the tested zone blankets the Gocerler zone.

Amity also was evaluating existing seismic data in the Adana basin on Turkey's Mediterranean coast, where it held nine exploration licenses. The blocks contained several undeveloped gas discoveries, but no well had been drilled for 10 years.

Amity said explorers drilling for the Osmancik had tended to drill through the Danismen with high mud weights without testing.

The Gocerler structure was a seismically defined dome north of the Marmara Sea and midway between Istanbul and Greece's eastern border. The well site was 15 km northwest of Yulaf gas field, served by a TPAO pipeline.

Zarara Oil & Gas Ltd. took a 25% interest on the 25,000-acre Kandamis production license 90 miles west of Istanbul. The block had an undeveloped 1958 gas discovery and five delineation wells. The partners planned to drill for Osmancik gas at 4,500 ft.