Washington, D.C.
, February, 3 2004 – International financiers, including IFC, the private sector arm of the World Bank Group, today marked the formal financing of investments in the Azeri-Chirag-Deepwater Gunashli (ACG) Phase 1 oil field and the Baku-Tbilisi-Ceyhan (BTC) pipeline.
IFC has contributed financing of $155 million and has mobilized a further $155 million from 15 international commercial banks for the two projects.
The projects will generate significant revenues for Azerbaijan, Georgia, and Turkey and have set new precedents in transparency of revenues and of business agreements between the companies and governments involved.
Through a series of initiatives, IFC is helping local entrepreneurs in all three countries benefit from the oil projects. This includes technical assistance to service and supply companies, leasing activities, capacity building for local consultants who provide business services, and the development of new financial products to improve access to capital for small and medium enterprises. In the first three quarters of 2003 some $30 million has flowed to small Azerbaijani businesses in contracts related to the oil projects, while state-owned and joint-venture companies have won about $202 in contracts.
Azerkorpu, a local construction company that recently won a contract related to the oil projects, is one of many small businesses in Baku to benefit from the technical assistance program being carried out jointly by IFC and the Baku Enterprise Centre.
"As we have to comply with international business standards, the training provided to us is of great importance. It has helped us acquire necessary knowledge, become competitive, and win the contract,” said Mr. Abulfat Huseynov, Azerkorpu’s deputy chairman for Health, Safety and Environment (HSE) and Personnel Issues.
Based on IFC’s experience with similar projects, the projects include nine layers of monitoring – four internal and five external—that will result in seven different reports being made public. The lenders are committed to monitoring the project over the life of the financing. One social monitoring trip has been completed and another begins this month, while two environmental monitoring trips have been completed and a third at the end of this month.
“This level of monitoring and transparency is unprecedented, and we at IFC are strongly committed to active monitoring of this project and to public disclosure of the monitoring reports. We have also committed to continuing proactive engagement with local civil society throughout the life of the project,” said Rashad Kaldany, director of the World Bank Group’s Oil, Gas, Mining, and Chemicals Department. The reports are available at:
http://www.caspiandevelopmentandexport.com
Notes for Editors:
The Board of Directors of the International Finance Corporation, the private sector arm of the World Bank Group, approved investments in the Azeri-Chirag-Deepwater Gunashli (ACG) Phase 1 oil field and the Baku-Tbilisi-Ceyhan (BTC) pipeline on November 4, 2003.
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 the ACG fields are developed. The equivalent revenues from pipeline transit revenues to Georgia are expected to be approximately $580 million. Turkey is expected to earn $3.4 billion from pipeline and terminal operations, transit fees, and upstream investments, again based on full development on the ACG field.
The projects’ Host Government Agreements, Inter-Governmental Agreement, and Production Sharing Agreement were made public, which is a first in a project of this nature.
Revenues from the oil and gas projects in Azerbaijan will be placed in a state oil fund, which is 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.
At 1,760 km, the pipeline is one of 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.
More information about the ACG Phase 1 and BTC projects, as well as on the multistakeholder forums and response to criticism of the project, can be found at
www.ifc.org/btc
.
The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $16.7 billion for its own account and $6.6 billion held for participants in loan syndications.
