TotalFinaElf joins Baku-Ceyhan

The Baku-Tbilisi-Ceyhan Owners and TotalFinaElf S.A have signed an agreement, which would introduce the French company into the oil transportation project with a 5 percent shareholding.

Baku-Tbilisi-Ceyhan (BTC) is designed to take most of the Caspian hydrocarbons, or 'major oil', to world markets.

BTC will be second major export pipeline following the recent start of the Caspian Pipeline Consortium (CPC) operations in the northern part of the region.

TFE has substantial interests in the North Caspian and is also a 10 percent shareholder in the Shahdaniz gas field offshore Azerbaijan, but has no stake in the major offshore Azeri-Chirag-Gunashli field.

TFE's entrance would follow that of Agip, which joined with 5 percent earlier this year, and is welcomed by the existing owner group as it reflects the widespread belief that BTC is going to be one of the most commercially attractive export routes from the Caspian region.

The project is well on course to enter the final stage of development later this summer as the engineering is now approaching completion and has produced a final cost estimate of 2,94bn dollars. This, combined with a recently announced increase in the proven reserves of the Azeri-Chirag-Gunashli field, means that the economics of the BTC are now proven beyond doubt. The commercial agreements required to facilitate the final stage are approaching conclusion and negotiations with potential financial lenders to the project are progressing very well. Actual physical construction of the pipeline will commence in Spring 2003.

The sanctioning of the construction is anticipated to take place in a final meeting of participating companies in late June-early July.

The BTC Owner Group currently comprises of bp (25.72%, operator); Unocal (7.74%); Statoil (6.45%); TPAO (5.08%); Eni (5%); Amerada Hess (2.05%); Itochu (2.98%); SOCAR (45%).

'Strategic decision'

The company says the decision to join the Sponsor Group of the BTC is part of its strategy that would give it access, once the project is sanctioned, to export capacity for part of its future production from the Caspian, notably Kazakhstan.

TotalFinaElf believes that other major export lines than BTC and CPC will also be necessary notably toward the Arab-Persian Gulf in order to provide access to the Asian markets.

Background

Totalfina and Elf Aquitaine merged in 2000 as TotalFinaElf, becoming the fourth oil major in the world. It is now one of the leading oil companies in the world. With operations in more than 100 countries, its activities span all aspects of the energy industry from Upstream - oil and gas exploration and production - to Downstream - refining and marketing of refined products as well as international trading in both crude and refined products. TotalFinaElf is also a major player in the Chemicals markets, through its branch Atofina. The Group's strategy has been declined in these three sectors.

'Bad times'

The French company's strategic decision to join the BTC comes amid its reports of a 36 per cent fall in net profits for the first three months of the year.

Its net income slipped to 1.42bn euros (Ј900m; 1.3bn dollars) before exceptional factors, down from 2.2bn euros a year earlier.

Analysts had expected even worse performance because the company had warned of a 40 per cent fall in net profits.

Like its peers, TotalFinaElf was hit in a market characterized by lower oil prices and tighter profit margins.