U.S.-CASPIAN ENERGY POLICY: PROMOTING SOVEREIGNTY AND PROSPERITY

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U.S.-CASPIAN ENERGY POLICY: PROMOTING SOVEREIGNTY AND PROSPERITY

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U.S.-CASPIAN ENERGY POLICY:
PROMOTING SOVEREIGNTY AND PROSPERITY

"The opening of the Baku-Supsa line fulfills a long-sought goal - a network of multiple pipelines to bring the Caspian region's oil and gas to world markets. But the benefits of this pipeline go far beyond the energy sector. The line will serve as the cornerstone of an East-West corridor that can promote economic cooperation and growth among all the countries of the Caucasus and Central Asia."

President Clinton
Washington, D.C.
April 15, 1999

The Clinton Administration actively supported the development of oil and gas resources of the Caspian Basin. In 1995, the United States declared support for the establishment of multiple energy export pipelines from the region. Today that policy is reality, with multiple pipelines in operation, and the Caspian states are starting to reap the rewards. Support for multiple export pipelines is central in U.S. policy for two simple reasons - the need for new export capacity and the logic of the marketplace. Caspian energy resources could be a significant addition to global energy supplies, but major new fields require new pipeline infrastructure. In addition, the existence of alternate routings minimizes the ability of any transit state to exact commercial leverage by restricting or obstructing pipeline operations. U.S. policy on Caspian energy is facilitating the export of Caspian oil and gas to world markets; creating incentives to resolve regional conflicts; and fostering greater prosperity in the Caspian region. The Clinton Administration has supported the positive role that Russian institutions can play in the development of Caspian energy resources. The Clinton Administration has supported the construction of transport corridors through Russia, the participation of Russian companies in several Caspian basin energy consortia, and the use where appropriate of Russian technical expertise, manufacturers, and other capabilities in Caspian energy projects.

A RECORD OF ACCOMPLISHMENT

Supported the development of an East-West pipeline from Baku to Tbilisi to Ceyhan. Witnessed the signing, on November 18, 1999, of an Inter-Governmental Agreement among the Governments of Turkey, Georgia and Azerbaijan that will provide the framework for the Baku-Tbilisi-Ceyhan oil pipeline to support multiple pipeline routes connecting Caspian sea resources with world markets. In November 2000, a variety of interested companies formed a Sponsors Group for the project and initiated engineering studies for the one-million-barrels-per-day pipeline. This main export pipeline is intended to bring to international markets oil that is being produced in Azerbaijan, Kazakhstan and possibly elsewhere around the Caspian Basin. The United States provided technical support, legal advisors and other assistance to support the brokering of this agreement which defines the commercial framework for the pipeline. The pipeline will supply refineries largely in the Mediterranean and Western Europe, but the line will also have broader positive impacts on international oil markets by increasing global supplies and incrementally reducing dependence on supplies from the Persian Gulf.

Reached an agreement in 1996 (between Vice President Gore and Russian Prime Minister Chernomyrdin) that broke a longstanding logjam that had hampered progress on the Caspian Pipeline Consortium line, which is to run from northwestern Kazakhstan to the Black Sea port of Novorossysk across southern Russia and onward. Construction of the line itself is now complete, with only testing, commissioning, and line-fill work ahead. The project is already bringing far-reaching benefits to Russia and Kazakhstan in terms of expanded employment, manufacturing, and governmental revenues. The line will principally serve the Tengizchevroil project, and the first shipment of oil from the line is scheduled to depart from Novorossysk in mid-2001.

Persuaded international energy companies in 1995 to build both a western "early oil" pipeline from Baku, Azerbaijan to Supsa, on the Black Sea coast of Georgia, as well as a northern "early oil" pipeline from Baku, Azerbaijan to Novorossiysk, Russia. The western line opened in April 1999 and is operating at its capacity of 115 thousand barrels per day. It principally serves the Azerbaijan International Operating Company's (AIOC's) fields in the western Caspian. The northern line opened in November 1997, with a capacity of 130 thousand barrels per day, although it was periodically out of service due to the instability in Dagestan and Chechnya. It serves SOCAR, AIOC and other fields in Azerbaijan.

Played a facilitating role intended to ensure that these interests accommodate each other and maximize opportunities for U.S. companies in all elements related to Caspian energy development - exploration and production activities, service providers and transportation companies. The development of Caspian energy resources requires the marshalling of diverse capabilities - both public and private - and the aligning of commercial, financial, political and technical interests. As a result of the United States government's support, U.S. companies are prominently represented in the Caspian energy scene.

Appointed Ambassador Richard Morningstar in July 1998 to the newly-created position of Special Advisor to the President and the Secretary of State for Caspian Basin Energy Diplomacy. This new position reflects the strategic importance of both energy development and geopolitical pluralism in the Caspian region. In July 1999, Morningstar was succeeded by Ambassador John Wolf, and in November 2000, Elizabeth Jones succeeded Wolf.

Announced in May 1998 the establishment by the U.S. Trade and Development Agency, the U.S. Export-Import Bank and the Overseas Private Investment Corporation of the Caspian Finance Center, in Ankara. The Center's mission is to facilitate the development of energy and other infrastructure projects in the Caspian region by combining the forces of the U.S. Government's three export credit agencies.

Issued numerous technical grants from the U.S. Trade and Development Agency (TDA) for Caspian energy projects. TDA's cost-shared grants fund feasibility studies and other strategic analyses that pave the way for the export of U.S. goods and services. TDA grants have helped U.S. oil and gas companies and service providers to assess individual projects; have ensured that governments in the Caspian region had proper legal and financial expertise at their disposal for commercial negotiations; and have allowed countries to undertake strategic assessments of energy production, consumption and exports in order to clarify their own objectives and help U.S. companies to meet those objectives.

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