APPENDIX 1
Memorandum by the Export Credits Guarantee
Department
BTC ALLEGATIONS—ECGD'S
RESPONSE
ECGD has seen the range of allegations contained
in the submissions to the Committee from The Corner House, the
Baku Ceyhan Campaign, and from Michael Gillard.
The allegations made in these submissions are
familiar to us and I will address them below. I have enclosed
our Minister's letter of 19 March to The Corner House, which I
believe answers the majority of questions raised by these memoranda.
I would be grateful if the Committee could give this due consideration.
ECGD's involvement in the BTC pipeline project
involved extensive and thorough scrutiny of a range of issues
during the two years prior to underwriting. We carried out an
assessment of the financial, social, technical and environmental
risks associated with the project prior to taking a decision.
In this due diligence the lenders, including
ECGD, were advised by several independent experts and were not,
as is alleged, solely reliant on information provided to us by
BP or BTC. These experts were:
— Parsons E&C (now WorleyParsons)—pipeline
technical issues
— Paragon—upstream engineering
— Taylor DeJongh—project economics
— Mott Macdonald—social and environment
— Freshfields Bruckhaus Deringer—legal
— Miller Insurance Group Ltd—insurance
We remain satisfied that we carried out this
process with the utmost rigour.
During this process, ECGD, together with the
other lenders—the EBRD and IFC, other export credit agencies
and commercial banks—carried out a comprehensive and wide
ranging consultation with NGOs and other stakeholders about BTC,
including NGOs in the three host countries. We have been transparent
about our consideration of the application throughout, and our
final decision took into account the information that was presented
to us during the consultation.
Where NGOs raised specific issues we looked
into them, either by referring to published information, asking
our consultants for an opinion or by raising it with BTC. Having
established the facts we then made a judgement on the issue.
We also took advice from DFID and FCO, IFC,
EBRD and the other lenders, and our Business Principles Adviser
visited most of the pipeline route.
We believe BP valued our input to addressing
potential environmental and social impacts and that this resulted
in improvements to the final project. Our policy was one of constructive
engagement: We actively facilitated discussion between all parties
concerned with the project and believe it is a better project
as a result.
I will turn now to the specific allegations
about the coating. We are aware that cracks in the field joint
coating polymer were detected by the ongoing inspection regime
in place on the pipeline prior to burial. These arose as a result
of a technical problem with the application process, which has
since been rectified.
Work on the application of the coating was halted
temporarily while a solution was developed. The costs of this
are estimated to be minimal, and are minute compared to the figures
of hundreds of millions of dollars suggested by some correspondents.
BTC Co did not inform ECGD of problems with
the field joint coating material because testing and use is regarded
as a routine part of the pipeline construction process. There
has been no cover up. No adverse material event has occurred that
would require ECGD to be notified. The project will continue to
be constructed to international standards and is on time and on
budget for completion for first oil in 2005.
WorleyParsons confirmed that, in its opinion,
BTC's evaluation, testing, selection and application of SP-2888
can reasonably be considered to conform to Prudent Industry Practices.
During their routine visit to the pipeline in May 2004, they will
again address the coating issue. We will consider all evidence
arising from this.
The projects we support tend to be complex multi-million
pound contracts involving a range of companies. This type of project
tends, by its very nature, to throw up a number of engineering
challenges. These should be differentiated from events that threaten
the future viability of a project, the environment in which it
is located or the communities upon which it impacts.
ECGD is pleased that it has been able to benefit
UK exporters by offering its support. We were always aware that
this was a challenging project, but we believe that it has overall
a positive impact and that our involvement and that of the other
agencies helped to ensure this.
John Weiss
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