World Bank Pipeline in Georgia and Azerbaijan Illustrates Problems with Extractive Industries

The Baku-Supsa pipeline was the first fast-track component of the “contract of the century,” involving partial development of the Chirag oil field and related facilities in the Caspian Sea. The export of oil from Sangachal is routed via the Northern Route Export Pipeline to Novorosiysk and the Western Route Export Pipeline to a new storage terminal at Supsa on the Black Sea. The project cost USD 1,98 billion total, including USD 400 million financing from the EBRD and IFC. The project was designed as a model intended to prove the drilling potential of the politically unstable region, providing long-term financing that had “not previously been made available to the region,” and serving to both mitigate the risks associated with private sector investments as well as create a precedent for the possible future involvement of IFIs in Caspian Sea Oil reserves development.