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Azerbaijan and Georgia
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Early Oil Project
IFC provided financing to five major foreign oil companies for the Early Oil Project in Azerbaijan and Georgia. The Project is the first phase of an integrated staged development of the Azeri, Chirag and Deepwater Guneshli fields, operated by BP for the Azerbaijan International Operating Company (a consortium of 10 foreign companies that hold the license). The Project involved rehabilitation of an existing offshore platform at the Chirag field in the Caspian Sea, drilling of wells, construction of offshore pipelines and of onshore terminals for oil and gas, and the construction/ reconstruction of two export pipelines, one running north from the Sangachal terminal to the Russian border, and the other one running west from the Sangachal terminal to a new terminal at Supsa, on the Black Sea Coast of Georgia. The Project was completed at a cost of US$2.0 billion, and first oil production commenced in November 1997. The average production from the Early Oil project is currently at about 120,000 bpd, surpassing original estimates. The Project represented the first major oil development in the Caspian Sea following the collapse of the Soviet Union. Political and commercial risks have remained relatively high in this region, prompting companies to seek some mitigation of their financial exposure. Oil and gas development in the Caspian region is critical in providing a basis for economic revival, as well as in stabilizing the region through creating transport links and a mutual interest in regional investment.
IFC's Board approved a US$200 million investment (US$100 million A Loan and a US$100 million B Loan) in the project, by financing five members of the AIOC consortium to mobilize necessary funds, reduce their exposure to a project with significant political risk, and lay the groundwork for future financing for related projects in the region. IFC's due diligence assisted the Project sponsors to understand the impacts of the Project, and provided a consistent set of stringent guidelines for social and environmental review. IFC worked in parallel with EBRD, which mobilized the same amount of financing, demonstrating the potential for synergies between IFC and other multilateral organizations in dealing with major complex projects.
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