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C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000305 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/SNEC AND EB/ESC 
USDOE FOR FE - SWIFT AND OS - WILLIAMSON 
 
E.O. 12958: DECL: 02/27/2016 
TAGS: ENRG ECON EPET AJ KZ GG TR
SUBJECT: BTC COMPLETION ON TRACK FOR MAY; BP WORRIES GOAJ 
ENERGY POLICY ADRIFT 
 
REF: BAKU 1890 
 
Classified By: DCM Jason Hyland, reasons 1.4 (b), (d) and (e). 
 
¶1. (C) SUMMARY. In his February 16 meeting with DCM 
(attending for Ambassador) and the British Ambassador, AIOC 
President David Woodward reported that BTC appears on 
schedule to send oil from Ceyhan by the end of May, with 
public ceremonies to take place in June.  However, this 
depends on BP achieving a final agreement on outstanding 
issues with BOTAS.  If more ACG oil cannot be sent out by 
rail, BP may have to throttle back on ACG production until 
BTC is ready.  SCP progress continues, but Woodward is 
disappointed at the GOAJ's failure to respond to a 
BP-proposed plan that would meet the GOAJ's stated goal of 
increasing the amount of associated gas it gets from the ACG 
field.  Pointing to this and other events, Woodward 
characterized the GOAJ and SOCAR as adrift and unfocused on 
energy policy -- a situation exacerbated by recent changes in 
Azerbaijan's energy establishment.  END SUMMARY. 
 
----------------------------- 
OIL: STEADY PROGRESS WITH BTC 
----------------------------- 
 
¶2. (C) AIOC President and BP senior executive David Woodward 
began his monthly meeting with DCM (attending for Ambassador) 
and the British Ambassador with the announcement that, for 
the first time, BTC is slightly ahead of schedule.  The 
pipeline has been filled to a little over half its capacity 
(5.6 of 10.3 million barrels).  BP is still working on a 
commercial agreement with Turkish pipeline company BOTAS to 
settle outstanding debts related to overruns and other 
issues, and this deal will likely be concluded at the end of 
March.  Woodward noted that the terms of the deal will have 
to be acceptable to Azerbaijan, as Azerbaijan is a 
stakeholder in the project. 
 
¶3. (C) The first lifting of BTC oil from Ceyhan still looks 
to be set for the end of May, said Woodward, and the public 
event celebrating the completion of BTC will likely take 
place in June -- probably in the second or third week thereof 
to avoid conflicts with the Caspian Oil and Gas Show in Baku 
the first week of June or the CERA meetings in Istanbul at 
the end of the month.  In the meanwhile, BP is working with 
SOCAR to increase the amount of oil they are shipping out via 
rail.  SOCAR, said Woodward, seems reluctant to do this -- 
probably because it wants to use the rail route for its own 
volumes.  If BP can't send any more oil by rail, BP is faced 
with the unappetizing option of having to cut back production 
at the Azeri-Chirag-Guneshli (ACG) field which feeds BTC 
since the northern and western "early oil" pipelines are at 
capacity. 
 
----------------------------------------- 
GAS: PROGRESS WITH SHAH DENIZ BUT NOT ACG 
----------------------------------------- 
 
¶4. (C) In gas matters, Woodward said that the TPG 500 
platform is set to sail out to Shah Deniz in March. 
Construction is progressing on the South Caucasus Pipeline 
(Baku-Tblisi-Erzerum) and the project looks on track to 
deliver gas in September.  Woodward promised a briefing on 
gas issues for the British and American Ambassadors for early 
March. 
 
¶5. (C) A few months ago, Woodward noted, the GOAJ had 
requested BP to provide Azerbaijan with more of the 
associated natural gas from ACG.  Currently, BP reinjects 
most of the associated gas from ACG back into the field to 
increase pressure and thus ensure greater oil production. 
The leftover associated gas (about 1.4 bcma) is piped to 
shore for Azerbaijani domestic use.  The GOAJ would like to 
double this figure and get 3.0 bcma.  Having less gas to 
reinject would negatively impact oil production, so BP 
offered to provide additional gas in exchange for the right 
 
BAKU 00000305  002 OF 002 
 
ENERGY POLICY ADRIFT 
 
to exploit the large gas field that lies below ACG.  The GOAJ 
has still not responded to this proposal, said Wooodward, 
although it seems to expect the gas. 
 
---------------------------- 
GOAJ ENERGY POLICY "ADRIFT"? 
---------------------------- 
 
¶6. (C) Woodward said that the ACG associated gas project is 
not the only area where BP is having difficulties with SOCAR. 
 For example, he noted, SOCAR has yet to approve BP's 2006 
work plan for ACG.  Additionally, SOCAR has not followed 
through on projects that SOCAR itself has initiated, and 
there has been no progress with BP's plans to exploit fields 
near the Absheron peninsula.  The construction of BP's new 
headquarters, financing of which was connected to a business 
unit of the former Azpetrol, likewise remains stalled. 
 
¶7. (C) Taking the above into account, Woodward characterized 
SOCAR as adrift, perhaps due to recent leadership changes in 
its energy sector (reftel).  He opined that in general the 
GOAJ does not seem focused on energy issues any more, and 
seems less interested in pursuing new projects than on 
enjoying the fruits of BTC and SCP.  Woodward said that 
President Aliyev is not paying much attention to energy 
issues at the moment, and without his leadership the natural 
tendency of the GOAJ is inaction.  Avian flu is another 
example, said Woodward.  The GOAJ has asked that BP prepare 
an isolation facility in case of avian flu problems but has 
provided no real guidance. 
 
HARNISH 
HARNISH