SOCAR - SOUTH CAUCASUS GAS PIPELINE

Country:

Regional

Project number:

27637

Business sector:

Natural resources

Notice type:

Public

Environmental category:

A

Target board date:

09 Mar 2004

Status:

Completed

PSD disclosed:

10 Dec 2003

Project Description

The proposed financing is to fund a portion of the State Oil Company of Azerbaijan Republic's (SOCAR's) share of cash calls relating to the construction of a gas pipeline, which is being built to export gas produced from the Shah Deniz gas/gas condensate field.
 
SOCAR holds a 10% interest in the South Caucasus Pipeline (SCP) via its subsidiary AzSCP.
SCP will be a 690 km 42" diameter lined coated pipeline constructed parallel to the BTC from Azerbaijan through Georgia to the Turkish-Georgian border, where it will connect with the Turkish domestic gas network. BOTAS, the Turkish State pipeline company, is constructing a connector pipeline from Erzurum to the Turkish-Georgian border.
 
SCP will have capacity of 20 bcma with compressor and off-take facilities, metering and other ancillaries with 30-year design and 99% availability.
 

Transition Impact

The Country Strategy for Azerbaijan (BDS/AZ/02-1) calls for the Bank to enhance co-operation with SOCAR and to promote its commercialisation through the provision of commercial financing.
 
The key transition impacts of the AzSCP financing are:
 
Commercialisation of SOCAR - The proposed financing of SOCAR's subsidiary will provide the Bank with the tool to progress SOCAR's corporatisation and commercialisation. Based on the agreed conditionality, which has been defined in close co-operation with the World Bank and the IMF, the envisaged financing and the complementary technical assistance operation will lead to improved financial transparency, the implementation of commercialisation and restructuring measures and clarify the relationship between the state and the state-owned, commercial company SOCAR.
 
Competition - The realisation of the proposed SCP project will substantially increase competition in the Azerbaijani, Georgian, Turkish and, in the medium-term, the gas markets in south-eastern Europe.
 
Demonstration effect - The SCP technical operator BP is setting standards in corporate governance and business conduct in such areas as operational management, technology, financial transparency, disclosure of payments to the government, health, safety, environmental protection and procurement practices.

The Client

AzSCP is SOCAR's 100% subsidiary holding its 10% interest in the SCP. SOCAR is the state-owned joint stock company responsible for the development of Azerbaijan's petroleum sector.
Statoil has been appointed Commercial Operator of SCP, while BP has been appointed technical operator.

EBRD Finance

US$ 60 million, senior loan (of which up to US$ 20 million will be syndicated post-signing).

Project Cost

Total SCP project cost estimate is US$ 1,023.6 million.
AzSCP project cost estimate is US$ 118.5 million.

Environmental Impact

The Project was classified as "A/1", requiring the completion of Environmental Impact Assessments (EIAs). The EIA has been approved by the Azerbaijan and Georgian governments, and is consistent with EBRD environmental Policies and Procedures. The EIA contains the details for hundreds of environmental mitigation measures that will be implemented to minimise environmental impacts caused by construction and operation of the project. The EIA reviewed various project alternatives, including numerous routing alternatives for the pipeline. The selected route has been reviewed by several advisors and found to be the best route. Further, the mitigation measures proposed for the pipeline will reduce environmental risks associated with construction and operation to low levels which are considered to be acceptable
 
The EBRD has received the right to sit on the Board of Directors (as a non-voting observer) to ensure that AzSCP abides by its environmental undertakings as outlined in the Term Sheet and detailed in the Environmental and Social Action Plan which has formed part of the environmental documentation available to the public for review and comment. EBRD has worked with the sponsor to develop a rigorous monitoring program using in house staff and independent environmental consultants to ensure adequate implementation of the measures. The Team continues to work towards the introduction of a National Oil Spill Response Plan.
 
The ESIA, ESAP and other related documents can be viewed at www.caspiandevelopmentandexport.com/ASP/PD_SCP.asp or on the EBRD website.
There is an Environmental and Social Impact Assessment available for this project.

Technical Cooperation

TC project (TCS ID 13188) - Commercialisation and Restructuring of SOCAR - was initially approved by TC Com on 9 April 2003 and re-approved, with 2-stage approach, on 5 November 2003.

Company Contact

State Oil Company of Azerbaijan Republic
73 Neftchilyar pr.
Baku 370004
Azerbaijan
or
Mr. Raymond Conway
Senior Banker
EBRD
e-mail: conwayr@ebrd.co
 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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Text of the PIP

Project Complaint Mechanism (PCM)

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Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.