Press Release: IFC Approves Investments in Caspian Oil and Pipeline Projects
The International Finance Corporation, the private sector arm of the World Bank Group, is proposing investments in the Azeri-Chirag-Deepwater Gunashli (ACG) Phase 1 oil field and the Baku-Tbilisi-Ceyhan (BTC) pipeline.
The ACG Phase 1 oil field involves the development of an oil field off Azerbaijan in the Caspian Sea. IFC’s investment in ACG Phase 1 consists of loans of up to $30 million for its own account and further loans of up to $30 million to be commercially syndicated. The total project cost of ACG Phase 1 is approximately $3.2 billion.
The BTC pipeline is a dedicated crude oil pipeline system, 1760 kilometers long, with a capacity of 1 million barrels per day. The pipeline will extend from the ACG field through Azerbaijan and Georgia, to a terminal at Ceyhan on the Mediterranean coast of Turkey. IFC’s investment in the BTC pipeline consists of a loan up to $125 million for its own account and a loan of up to $125 million in commercial syndication. The total project cost of BTC is approximately $3.6 billion.
Azerbaijan is expected to generate $29 billion in oil revenue over the next 20 years, when the full phases of ACG fields are developed. From the two proposed projects, pipeline transit revenues to Georgia are expected to be approximately $500 million. Turkey is expected to earn $1.5 billion from pipeline and terminal operations, transit fees, and upstream investments.
Some 10,000 jobs are expected to be created during construction and around 850 during operations. Indirect jobs are also expected through local sourcing and additional economic activities. IFC, together with other partners, has a program in all three countries to help local companies and entrepreneurs benefit from related economic activities. The program includes technical assistance to service and supply companies, leasing activities, the development of local consultancy capacity in the provision of business services, and the development of new financial products aimed at improving access to capital for small and medium enterprises. It also builds on IFC’s existing investments in microfinance and provides expertise and assistance in business activities related to biodiversity, energy efficiency, and corporate governance. The program includes dedicated IFC staff on the ground working with local companies.
The preparation of the two projects marks a milestone in IFC’s continued drive for excellence in environmental, social, and governance practices and builds on the successes and lessons learned from the Early Oil project in Azerbaijan and Chad-Cameroon petroleum and pipeline project. In particular, the projects break new ground in transparency, environmental and social safeguards, community consultation and involvement, national and international civil society engagement, and local economic benefit.
These are challenging projects where IFC has benefited from its experience in structuring complex cross-border projects in other difficult environments. Revenues from the oil and gas projects in Azerbaijan will be held in a state oil fund, which will be audited by the international firm Ernst and Young and disclosed to the public. The oil fund currently has a balance of approximately $787 million from previous projects.
IFC has worked closely with the project sponsors and other lenders in reviewing and preparing the project, to ensure the application of best practices, including in financial, technical, legal, and environmental and social areas, all of which are key to mobilizing significant private and institutional investments in three countries.
IFC has also listened closely to various stakeholders: for example, it held six Multistakeholder Forum meetings, together with EBRD, in the three affected countries in August and September this year.
At 1760 km, the pipeline is the longest of its kind in the world. It crosses 17,700 land parcels but no households are displaced. Extensive consultation with affected communities has been undertaken by BTC and verified by IFC. Compensation packages for land, which are consistently above market rates, have been set and are independently monitored.
For more information or to arrange interviews, please contact:
Corrie Shanahan
Tel: 202-473-2258
Mobile: 202-294-4697
Email: cshanahan@ifc.org
Ludi Joseph
Tel: 202-473-7700
Mobile: 202.294.4699
Email: ljoseph@ifc.org
