Azerbaijan claimed yesterday that interference from the World Bank is holding up a multi-billion dollar project to build a gas pipeline from the Caspian Sea to Turkey.

Ilham Aliyev, vice-president of Socar, the Azeri state oil company, claimed the World Bank was pressuring Georgia, over whose territory the pipeline will pass, to insist on unacceptably high transit tariffs.

He confirmed officially for the first time that talks on the pipeline are mired in disagreements over the tariffs. "I am strongly against interference from the World Bank in the negotiation process between Georgia and Azerbaijan," said Aliyev. "The World Bank should not interfere in this sort of thing."

The New York Times this week printed a letter from Judy O'Connor, World Bank representative in the south Caucasus, urging Georgian President Eduard Shevardnadze to hold out for higher tariffs.

She was quoted as saying that it was in the interests of Georgia's impoverished economy to drive a harder bargain.

The World Bank's intervention "did not improve, but worsened the situation in what were already difficult negotiations. Our position on tariffs is based on our calculations and we do not intend to give it up," Aliyev said.

An agreement between Georgia and Azerbaijan on the pipeline was to have been signed in July but has been repeatedly delayed as negotiations between the two countries foundered.
Until now the official line from Georgia and Azerbaijan has been that the deal was agreed and ready for signing.

According to reports, the World Bank is recommending that Georgia gets at least $5 dollars (5.5 euros) for each 1000 cubic metres of gas transported, compared to the two dollars initially on the table.

Georgia's ambassador to Azerbaijan, Zurab Gumberidze, said the World Bank was forcing it to take a tough stance in negotiations.

"The World Bank is asking for increased tariffs," he said. "They have projects in Georgia worth more than $100 million, therefore they can give Georgia recommendations."
"They believe that Georgia, as a transit country, could collect large transit tariffs," added the ambassador.

However, he expressed confidence that a compromise would soon be found over the tariffs and said he was hopeful Shevardnadze would fly to Azerbaijan in September to sign the deal.

The pipeline from the Azeri capital, Baku, to the Turkish region of Erzurum, will be the only export route for natural gas recovered from the massive Shah Deniz field in the Caspian Sea.
Meanwhile, the government of oil-rich Azerbaijan gave the green light to the BP-led Azerbaijan International Operating Company (AIOC) for the next phase of its Caspian oil production project yesterday.

AIOC's president David Woodward and Azeri State oil company Socar's president Natik Aliyev signed an agreement on production at three offshore Caspian fields — Chirag, Azeri and deepwater of Guneshli. The cost of the phase one expansion plans is put at $3.3-3.4 billion.

Woodward told journalists after the signing ceremony that Phase One aimed to boost production to 350,000-370,000 barrels per day in 2005 from current levels of 100,000-130,000 bpd.
The project envisages bringing the Azeri field onstream in early 2005 — adding to volumes from the Chirag field which has been in production since 1997.

The next phase envisages the construction of a drilling platform for 48 wells, a gas compressing facility, an underwater pipeline from the Azeri field and modernisation of an onshore oil terminal.
The new production levels would be reached just as a planned $2.9 billion pipeline from Baku across Georgia to Turkey's Mediterranean port of Ceyhan would be completed, Woodward said.

AIOC has already pumped more than 14 million tonnes of oil from Chirag since 1997, exporting oil through a pipeline to Supsa on Georgia's Black Sea coast.

AIOC expects production from the offshore complex to reach 1.0-1.3 million bpd between 2008 and 2010.

AIOC unites BP, Unocal, Socar, Lukoil, Statoil, Exxon Mobil, TPAO of Turkey, Devon Energy, Itochu and Delta Hess.