BTC Project is the First Major Test of the Equator Principles

London - 27 February 2004

The $3.6 billion Baku-Tblisi-Ceyhan oil pipeline project, financing for which closed on February 3, 2004, was the first major test of the Equator Principles. Because implementation of the project required resolution of sensitive environmental and social issues, the project was categorized by banks as a "Category A" project under the Equator Principles. BTC thus became the first project treated as Category A under the Equator Principles.

BTC will transport oil from Azerbaijan through Georgia to the Turkish port of Ceyhan. The principal developer and operator of the pipeline is BP, a global energy company with world-class capabilities to manage complex environmental and social situations. The pipeline solves the thorny question of how to commercialize Caspian oil without shipping it through the fragile and overcrowded Bosporus Straits.

The project presents a number of environmental and social challenges, including pipeline routing near potentially critical natural habitats, the claims of a number of groups for special recognition and compensation, seismic activity along parts of the route, and political turmoil in Georgia. The financing consortium initially included four private-sector banks, as well as IFC, EBRD and OPIC, which each have extensive environmental and social policies and staff experienced in environmental and social issues evaluation. The consortium developing BTC conducted comprehensive reviews. The senior lenders engaged an independent consultant, Mott MacDonald, to conduct due diligence and assess compliance with the Equator Principles. It was decided that an independent consultant would also be used to assess the project going forward and to monitor the project's compliance with its environmental and social management plan.

There was opposition to the project development by several NGOs which alleged 127 "violations" of IFC Safeguard Policies and therefore of the Equator Principles. IFC took the unusual step of issuing a rebuttal to the NGO criticism.

The banks involved in the financing evaluated the criticisms and conducted extensive due diligence on environmental and social issues with BP as well as with IFC and other agencies involved in the financing. As a result of their evaluations, eight banks which have adopted the Equator Principles concluded that the project had complied with IFC Safeguard Policies and the Equator Principles. Mott MacDonald confirmed this assessment. The IFC Board also concluded that its Safeguard Policies had been met. US Eximbank, which effectively applies IFC Safeguard Policies, came to the same conclusion, and the project was also approved by EBRD, OPIC and four other export credit agencies.

BTC is the first major application of the Equator Principles. Because the Safeguard Policies referenced in the Equator Principles are processes and questions to be asked, they require significant judgment on the part of the banks. This means that, in spite of intensive work and good faith by all parties, people can differ on their conclusions. In this case, while some NGOs have a different view, the private-sector banks, the multilateral and bilateral agencies, the sponsors and the host governments all believe that this project incorporates significant measures to respect the environment and social concerns, and should go forward.

There is extensive public disclosure and consultation concerning BTC. The project maintains a comprehensive website. NGO criticisms are also accessible on the web, as is IFC's rebuttal of NGO criticism. ABN AMRO issued a statement on its application of the Equator Principles to the BTC project. Mott MacDonald's report is also available.

For more information on BTC, see:

BTC project website
WWF criticism
IFC rebuttal
ABN AMRO statement