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Costs gush on Caspian pipe refurb

A BP-LED consortium and the Azerbaijan state oil company are investigating a pounds235M cost overrun on a pipeline refurbishment scheme being project managed by Kvaerner.

Originally employed to oversee the refurbishment of the 850km pipeline following a feasibility study by Fluor Daniel, Kvaerner discovered that the line required complete replacement.

The oil consortium, the Azerbaijan International Operating Company, and the Azeri state-owned oil company Socar are examining the extra costs incurred during the work on the Soviet-built pipeline from the Caspian oil terminal of Sangachal to the Georgian Black Sea port of Supsa.

The AIOC originally decided to refurbish the pipeline after the feasibility study by Fluor Daniel. But pressure tests during construction revealed it to be in worse condition than expected and the pipeline has had to be replaced. Costs have nearly tripled from pounds120M to pounds355M.

'We originally decided in early 1996 it would be cheaper to refurbish the line,' said AIOC vice president Stephen Back. 'But it transpired that it was a major exercise so we took the decision in November 1997 that replacement would be cheaper.'

The feasibility study was carried out on a representative section of the pipeline but it was discovered that other areas had problems such as illegal 'tap in' holes and poor quality connections.

'Fluor Daniel had carried out a feasibility survey and said refurbish,' said Kvaerner country manager John Kates. 'But when we got to testing the pipe it was in worse condition than expected. The state of repair of the pipeline was unacceptable. It is now essentially completely new.'

The establishment of a western pipeline through Georgia is a key part of the AIOC's plans for transporting Caspian oil to the West. It provides an additional route to an existing northern pipeline which passes through the politically unstable region of Chechenya.

The new pipeline is expected to be completed in March next year although oil will be loaded into the Azeri end as soon as December. First oil is expected to reach the Black Sea in April. Richard Thompson

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