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                     Office of the Press Secretary
                           (Istanbul, Turkey)
For Immediate Release                                  November 17, 1999


Caspian Energy Pipelines

The President will witness the signing of agreements involving the Governments of Turkey, Georgia, Azerbaijan, Turkmenistan, and Kazakhstan, that will provide frameworks for the Baku-Ceyhan oil pipeline and the Trans-Caspian gas pipeline. The United States strongly supports the overall development of Caspian Basin oil and gas resources and their export to world markets.

Signature of these documents underscores the importance of cooperation among the regional governments and energy companies; marks the successful conclusion of a complex first phase of negotiations; and gives momentum for the still difficult commercial and political negotiations that lie ahead.

Since 1995, the United States has supported the development of oil and gas reserves and the establishment of multiple energy export pipelines from the Caspian region. A critical element of this policy is support for export pipelines traveling along an east-west axis. A separate fact sheet reviews the history of U.S. support for Caspian energy development.

Baku-Ceyhan oil pipeline: The Governments of Turkey, Georgia, and Azerbaijan will conclude basic legal agreements on construction of an oil pipeline from Baku, Azerbaijan, through Georgia to Ceyhan, Turkey. Leaders from these three countries and Kazakhstan signed an Istanbul Protocol, pledging themselves to the realization of the Baku-Ceyhan line. This one-million-barrel-per-day 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 Istanbul Protocol serves as an umbrella for a unified agreement consisting of four components:

The documents presently being initialed will be signed during the next phase of Baku-Ceyhan (see below), once the Intergovernmental Agreement is ratified by parliaments. These documents provide the legal framework for establishment of a Main Export Pipeline Company (MEPCO); still to be agreed are binding "throughput" agreements by which companies pledge for shipment the specific volumes necessary to secure the pipeline's financing.

Construction is targeted to begin in the third quarter of 2001. The agreements stipulate that the pipeline will begin operations in 2004. It 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.

The next step on the road to construction of the Baku-Ceyhan line will be a meeting, possibly in December, of potential MEPCO owners, sponsors, and perhaps interested governments from both sides of the Caspian Sea, and the United States. The group will develop the legal structure for MEPCO, run an open season to secure volumes, contract for basic and detailed engineering, and develop a financing plan for the pipeline.

Trans-Caspian gas pipeline (TCP): The United States welcomes the Intergovernmental Declaration outlining the principles for the Trans-Caspian gas pipeline. The TCP will run from Turkmenistan, through Azerbaijan and Georgia, to Turkey. With an eventual projected volume of at least sixteen billion cubic meters per year, the TCP will help meet Turkey's growing natural gas import needs. Initial gas shipments are expected to originate in Turkmenistan, although Azerbaijan could play a role in the coming years once it begins to develop its own gas fields and markets.

The document to be signed by the Governments of Turkmenistan, Azerbaijan, Georgia, and Turkey will provide the foundation for an Intergovernmental Agreement and Host Government Agreements that would be concluded early next year. This work is expected to culminate in commercial contracts for construction and operation of the Trans-Caspian gas pipeline. Construction is anticipated to begin immediately following financial closure, which is expected in December 2000. Gas is scheduled to begin flowing in late 2002. The document provides the first explicit permission by the Governments of Azerbaijan and Georgia to permit TCP to cross their territories, and therefore marks an important step forward in the U.S. government's efforts to foster cooperation in the Caspian region.

Turkmenistan has engaged PSG Inc. and Royal Dutch Shell as sponsors of the Trans-Caspian Pipeline project. As the project moves forward, other firms may participate as well.

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