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| A Year late and a Billion Dollars over Cost: BP's |
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BP has admitted that its flagship pipeline through Azerbaijan, Georgia and Turkey is facing cost overruns of $1 billion - an astonishing 32 per cent over budget. [1] The cost overruns were revealed at a BTC Company Board of Directors meeting in Baku on 13 April.[1] BP has described the additional cost overruns as “incidental”. Whistleblowers [2] and monitoring non-governmental organisations lay the responsibility elsewhere: citing a mountain of construction failures, inappropriate use of materials and lack of environmental safeguards. [3] The 1,767km Baku-Tbilisi-Ceyhan (BTC) pipeline is due for completion on May 27th, more than a year behind schedule. With such major delays and additional costs, BTC Co partner companies are issuing conflicting statements over who is at fault for the widespread construction failures. The Azeri State Oil Fund blamed Turkish sub-contractor BOTAS for working slowly. BOTAS demanded an additional $400 million payment, complaining of additional requirements imposed from above. BP attempted to down-play talk of construction failures, focusing instead on “extra safety testing”. However, statements from whistle-blowers working for BOTAS as early as 2004 indicated that BTC construction in Turkey was out of control, with consistent failures to implement minimum standards and no oversight by BP. Further costs were racked up by BP’s choice of an inadequate pipeline coating for welds [4]. As the protective coating began to crack and peel away, the construction contractors AMEC and Spie Petrofac were required to re-apply it to welds. BP refused to award further costs until AMEC and Spie initiated legal proceedings. Yet David Woodward, BP Azerbaijan chairperson, glossed over BP’s operational failures by attributing increased costs to, “commercial issues with contractors.” To pay for the extra costs, the Azerbaijan government has raided SOFAR, the State Oil Fund - a fund that the public was told would be reserved for social development projects. Last year, a UK House of Commons Trade and Industry Select Committee investigation into the Export Credit Guarantees Department criticised the ECGD’s lack of transparency over the project. Project Lenders, including the Export Credit Guarantee Department, the European Bank for Reconstruction and Development and the Royal Bank of Scotland are being urged the Baku Ceyhan Campaign to question why the 32 per cent cost overrun was allowed to happen, and who is accountable. The Baku Ceyhan Campaign considers this a further attempt to divert attention from BP’s failure to maintain construction standards or environmental best practice. ”BTC’s cost overruns and delays suggest serious management failures by BP – management failures that are similarly apparent in BP’s operations in Alaska and the USA,” comments Nicholas Hildyard from the Corner House. “The financial community should question whether BP’s teflon-coated reputation is deserved.” Kerim Yildiz, Executive Director of Kurdish Human Rights Project, says, “BP has disregarded human rights and environmental standards throughout construction of this project. It’s clear there has been a major lack of oversight and accountability at every stage. Unfortunately, it’s the communities I speak to who will pay.” Mika Minio-Paluello of PLATFORM said, “In their eagerness to see the profits, BP forced construction ahead at reckless speed, running rough-shod over construction and environmental standards.”
For more information, contact: Nicholas Hildyard, The Corner House, ++44 (0) 1258 473795 Mika Minio-Paluello, PLATFORM, ++44 (0) 7766175641
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