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
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
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.
Read related press releases on the BTC project in Azerbaijan