EBRD BOARD APPROVES BTC PIPELINE FINANCING
The EBRD and BP plc, the main sponsor of the two projects, have agreed to launch a Regional Development Initiative to create long-term jobs and sustainable economic development after pipeline construction is complete. The initiative will foster private sector growth through a broad range of grassroots initiatives such as loans and grants to micro-businesses, training programmes and infrastructure. The EBRD and BP have each earmarked up to $25 million in grants and loans for the initiative; other members of the BTC consortium are expected to join with target funding overall of around $100 million. The first investments are anticipated for mid-2005.
The decision to finance BTC and ACG reflects the importance of both projects in unlocking the economic potential of the resource-rich Caspian region. They will bring significant revenue along with high transparency, business and environmental standards to Azerbaijan and Georgia, combined with prospects for sustainable economic development. Participation in the project gives the EBRD a role in monitoring construction and operation, and continuing its dialogue with the people of Georgia and Azerbaijan. The involvement of international institutions will also underpin initiatives to ensure transparency and monitoring of project revenues so that benefits are delivered to the population.
The EBRD financing will be used for portions of the 1,760km pipeline in Azerbaijan and Georgia; Turkey is not a country in which the EBRD operates. Part of the EBRD loan for BTC will help the State Oil Company of Azerbaijan (SOCAR) fund its 25 per cent stake in the pipeline. Along with BP and SOCAR, other pipeline sponsors are TPAO (Turkey), Statoil (Norway), Unocal (USA), Itochu (Japan), Amerada Hess (USA), Eni (Italy), TOTAL (France), INPEX (Japan) and Conoco Phillips (USA). Like the EBRD, the International Finance Corporation (IFC) of the World Bank is lending a total package of $310 million for the BTC and ACG projects.
The BTC and ACG projects are vital to the transformation of Azerbaijan and Georgia. Gross domestic product (GDP) is just over $60 per person per month in the two countries. Azerbaijan stands to make revenues of $31 billion to $42 billion over the life of the two projects (depending on the oil price). Georgia has no oil resources but will receive transit tariff revenues estimated at $508 million over 20 years, or 15 per cent of its annual GDP when the pipeline is at full capacity.
Carefully managed and monitored, the revenues from these projects can build the social and economic infrastructure that will support Azerbaijan’s and Georgia’s transition from command to market economies and foster the democratic process. These infrastructure projects are already giving positive signals to foreign investors and the pipeline is promoting regional stability through greater cross-border cooperation.
The EBRD conducted a thorough examination of the projects’ financial, legal, environmental and social impacts. They were shaped to meet EBRD, EU and World Bank standards, particularly with regard to environmental concerns and land compensation. As part of its deliberations, the EBRD met with many NGOs from the region and abroad, and together with the IFC held public meetings in Azerbaijan, Georgia and Turkey to hear the views of local communities.
The BTC and ACG projects set high standards for openness, transparency and anti-corruption measures. BP and BTC publicly report all revenues paid to the governments concerned. In Azerbaijan, oil and pipeline revenues go into the State Oil Fund of Azerbaijan, which is scrutinized by international auditors; its annual reports are available online to the public.
The emphasis of Oil Fund expenditure is on funding poverty reduction and socio-economic development, in accordance with the priorities identified under the State Programme on Poverty Reduction and Economic Growth. The International Monetary Fund, together with the other international financial institutions, will continue to closely monitor the status of oil fund expenditures and of fiscal policy more generally.
Going forward, the EBRD together with IFC will continue to be closely involved in the projects and will continue to monitor compliance with all undertakings.
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