Baku-Tbilisi-Ceyhan (BTC) oil pipeline
The 1,760 kilometre-long Baku-Tbilisi-Ceyhan (BTC) oil pipeline runs from the offshore oil fields near Baku in Azerbaijan in the Caspian Sea, through Georgia close to the town of Tbilisi, finishing south of Ceyhan on the southern shores of Turkey on the Mediterranean.
Completed in 2006, it has been built by a consortium of oil companies, led by the British oil multinational BP. Some 70 per cent of the estimated US$4 billion costs of development was financed and subsidised by public money or public institutions, including the UK’s Export Credit Guarantee Department (ECGD), which backed the project in 2004. BP chief executive John Browne had stated publicly that the BTC pipeline could not be built unless governments provided "free public money" to do so.
The contracts signed between BTC and the three host country governments – the Host Government Agreements (HGAs) – override all existing national laws (other than the constitutions of the three countries), thereby bypassing national social, environmental and other domestic legislation and giving effective sovereignty to BP and its partners over the pipeline route.
Fact-finding missions to areas along the pipeline’s route indicated severe social, environmental and human rights impacts from its construction and financing. The Turkish section alone broke international standards on 173 counts.
Institutional pressure on construction contractors has led to allegations of corners being cut and fundamental safety being compromised. A key concern has focused on an experimental anti-corrosion sealant coating applied to the pipeline’s joints, which has already caused extensive cracking. The independent engineering consultant for the pipeline, Parsons E&C, warned financial institutions contemplating supporting the project that it had "major concerns" about the integrity of the field joint coating being used on the Azerbaijan and Georgian sections of the pipeline. Any failure in this protective coating could result in a major pollution incident from oil leaking. Systemic failure would necessitate the pipeline being unearthed and recoated in its entirety.
The law firm acting for the export credit agencies considering financial support, Freshfields Deringer Bruckhaus, also raised questions about the difficulty of maintaining coating integrity for the Project's 40-year life. Concerns about field joint and line pipe coatings also appeared in the Independent Engineer's final report, and even BP's own consultant, Derek Mortimore, warned that the coating selected for use on the pipeline in Azerbaijan and Georgia was "utterly inappropriate to protect the pipeline".
Following a 15 February 2004 Sunday Times article, which exposed much of this information, the UK Parliament's Trade and Industry Committee held an inquiry in 2004-5 into allegations over the coating. Evidence was submitted indicating that the coating had never been properly tested, while ECGD admited that the coating had never been used before on a similar pipeline. Following ECGD approval of the project, a survey revealed that over one-quarter of the pipeline in Azerbaijan had been affected by cracking of the coating. Although BP claimed to have resolved the problem, a major investigation by financial news agency Bloomberg in January 2006 found that cracking had continued.
In March 2011, the UK Government ruled that the BTC consortium is breaking human rights and corporate social responsibility rules because it is not investigating or responding to complaints from local people of intimidation by state security forces in Turkey guarding the pipeline. The ruling potentially places BP in breach of its contracts with international financial institutions, because BP gave a legally-binding commitment to them that the BTC project would comply with these rules.