It will cost $13 million to build the 5- km pipeline that will carry associated gas produced at the Azeri-Chirag- Gunashli (ACG) offshore fields to the Azerigaz terminal at Sangachal, said Jacobus Nieuwenhuijze, the BP-Azerbaijan manager in charge of the terminal expansion project.

The pipeline will be able to transport 20 million-25 million of the associated gas that will be produced during the full-scale ACG development per day, Nieuwenhuijze said. "We have already designed the pipeline and the ecology ministry has approved an environmental impact study. All the pipes have been purchased and the route is being prepared," he said.

The ACG contract states that all of the associated gas produced at the fields is given to Azerbaijan free of charge. The block contains an estimated 90 billion cubic meters (bcm) of gas. The State Oil Company of the Azerbaijani Republic (SOCAR) is currently producing up to 3 million cu m or 1 billion cu m a year at the Chirag field.

Nieuwenhuijze said efforts to expand the Sangachal terminal itself were 70% complete. "All the necessary equipment has been brought in. Two reservoirs capable of storing 800,000 barrels of oil each are 85%- complete. We have also laid 300 km of 1,700 km of power cables."

Work on the main pumping station for the Baku-Tbilisi-Ceyhan (BTC) pipeline is going to schedule, and the generators that will supply the terminal with power are being tested.

"We will generate up to 150 megawatts of electricity, enough for the terminal's entire needs. The generators will be fuelled by the associated gas produced during the ACG project," Nieuwenhuijze said.

The Central Azeri well is due to yield its first oil at the end of 2004. BP plans to start pumping gas into the seam 12 months afterwards. Output will peak at 1 million barrels of oil a day in 2008. Up to 700 million cubic feet of associated gas will be produced with the oil.

The Sangachal terminal will eventually cover 540 hectares. The expansion costs are about $345 million. The Azerbaijani-Turkish consortium of Azfen/Tekfen and France's CMP Enterpose are performing the bulk of the construction.

Originally, the terminal had four reservoirs for an overall 240,000 barrels and covered 45 hectares.

BP is the ACG operator with a 34.1367% interest in the project. Other participants are SOCAR - 10%, Unocal - 10.2814%, Statoil - 8.5633%, ExxonMobil - 8.0006%, TPAO - 6.75%, Itochu Oil - 3.9025%, Amerada Hess - 1.0413%, Inpex Corp. - 10% and Devon Energy - 5.6262% and Delta Oil - 1.68%.

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