Life Along the Pipeline: BTC's Impact on Azerbaijan

Some 40 kilometers from the Azerbaijani capital of Baku stands a marvel of modern engineering -- the British Petroleum-operated Sangachal oil and gas terminal, a 730-hectare facility with room for over 2.6 million barrels of oil. This is the start of the 1,760-kilometer-long, $4-billion Baku-Tbilisi-Ceyhan oil pipeline, the South Caucasus' largest energy project. And this is where the debate begins over the role of hydrocarbons in shaping the region's future.

Over a 20-year span, Azerbaijan is projected to receive as much as $230 billion in revenue from energy development and export ventures, including the Baku-Tbilisi-Ceyhan (BTC) pipeline and the South Caucasus gas pipeline. Some $1.5 billion from a related oil fund for various social welfare and infrastructure programs has been spent since 2005 on constructing housing for internally displaced persons as well as building roads, bridges and water pipelines, among other projects. Another $1.46 billion remains in the fund for future use.

But in the village of Sangachal, a poverty-stricken hamlet of 4,500 people less than two kilometers from the oil and gas terminal, some residents contend that these promised benefits mean little.

Since the BTC pipeline's official inauguration in May 2006, Sangachal residents have been beset by a string of health problems, according to environmental activist Shakhla Tagiyeva, a 37-year-old kindergarten teacher. Roughly 35 children have been born since then with congenital birth defects, and the number of residents dying from cancer has increased, she claimed. Tagiyeva puts the blame on toxic nitric oxide gases she says that the terminal is emitting. To date, though, neither the government nor British Petroleum (BP) have responded to written protests about the matter, she added.

For energy expert Ilham Shaban, editor of the Turan-Energy daily bulletin, the accusations illustrate the misconception in Azerbaijan that British Petroleum and other oil companies can correct all existing social ills. The terminal, he said, "meets all safety standards." British Petroleum is being used as a scapegoat, he suggested, adding that blame for villagers' poor health should fall elsewhere. "[T]he environmental situation in Sangachal has always been terrible and it always was one of the most disadvantaged settlements in the country," Shaban claimed.

The Baku-Tbilisi-Ceyhan oil pipeline and the South Caucasus gas pipeline pass through 11 different regions in Azerbaijan, skirting or directly crossing 70 different towns, villages and hamlets.

In most places, the pipelines have brought few changes to residents' lives. Enthusiasm about their presence is scarce. As elsewhere in Azerbaijan, complaints persist about unemployment, poor healthcare, water supply and electricity. Ironically, the South Caucasus pipeline even passes under some villages where people have gone without gas for more than a decade.

Benefits from the BTC pipeline, however, are readily evident. In the case of Sangachal, as in almost all populated areas situated along the BTC and South Caucasus pipeline routes, British Petroleum renovated the village school, built a new kindergarten, installed a new sewer system, and constructed a new road. About 500 Sangachal residents were hired to work on construction of the pipeline, according to BP.

Residents of Talish, a village in the central region of Kurdamir, say that the new large houses and expensive cars that line their streets are the result of compensation paid to landowners by BTC Company, which built and manages the Baku-Tbilisi-Ceyhan pipeline, and wages earned by local hires working on the BTC and South Caucasus pipelines. The medium monthly wage for pipeline workers was $350, a relatively high salary for Azerbaijan's regions.

The BTC Company, made up of 11 Azerbaijani and international companies, paid over $14.7 million to Azerbaijani landowners during the pipeline's three-year construction period for use of their land, according to BP, the pipeline project's largest investor. The largest compensation ($300,000) was paid to a farmer in the region of Tovuz, while the smallest ($150) went to a family in the region of Hajigabul, about 20 kilometers from Baku.

Not surprisingly, given the potential sums involved, most pipeline protests in Azerbaijan have focused on compensation, rather than on environmental or other concerns. The most serious of these outcries has been the case of 14 families from the village of Hajali, located in western Azerbaijan. These families claim that they were never paid for use of their land, and accuse local officials of fraud. Forty-year-old Hajali villager Mehman Hasanov claims that when compensations were being paid for land use, his land was illegally registered in the name of a relative of the then chairman of the regional executive committee. After losing a case before the Azerbaijani Supreme Court, the village's 14 families now have an appeal before the European Court for Human Rights in Strasbourg.

Complaints about compensation practices primarily concern local officials, and not members of the national government. One activist, however, argues that British Petroleum itself shares much of the blame. Mais Gulaliyev, president of the Civil Initiatives Center, a Baku-based non-governmental organization and one of the very few outspoken BTC critics, claims that the company has not responded adequately to disputed compensation claims. Despite "56 meetings with BP representatives," he said, ""[t]hey always promised to find out [what was wrong], but did not solve a single problem yet." British Petroleum representatives did not respond to an interview request for this story.

Shaban, the Turan-Energy analyst, disagrees with Gulaliyev's criticism of BP. "[I]t is not BP's problem that the local authorities in some regions falsified documents," Shaban commented. "We can imagine what would have happened if compensations had been paid by the government. We would not have 14 unhappy families now, we would have 4,000."

In the end, compensation was paid, locals were hired, and the pipeline was constructed on schedule, he adds. "BP is a company, not a government to solve the social problems of the people in our country."