WASHINGTON, Oct. 18 (UPI) -- The hypothetical toppling of Iraqi President Saddam Hussein and the return of Iraq as a major oil exporter under new leadership probably won't depress world crude prices to the point that the development of the Caspian Sea region's reserves would be jeopardized, a State Department adviser said Friday.
Steven Mann told a Washington news briefing that the petroleum industry had concluded that there was enough demand to accommodate both Iraq and the Caspian nations at a price that would make it worthwhile for the development of Caspian infrastructure projects, such the Baku-Tblisi-Ceyhan pipeline, to continue.
"The financial estimates that I have seen for the BTC project have been calculated according to a range of oil prices," Mann told reporters. "The companies involved in this certainly have taken that into account, and it's their belief that even with oil selling at a much lower price than it is now, that the BTC project will be attractive."
Saddam's threatened regime has attempted to stir up opposition to possible U.S. military action by accusing the Bush administration of being more concerned with taking over Iraqi oil supplies than ridding the region of weapons of mass destruction.
Iraq has the world's second-largest oil reserves, and a regime change -- without Saddam at the helm -- would presumably put an end to current U.N. sanctions and open the door for an additional 1 million to 2 million barrels per day on the market. That would roughly double current Iraqi exports.
The United States alone imported more than 9 million barrels per day last week from around the world and ran more than 8 million barrels per day through its refineries, according to the U.S. Energy Information Administration.
The EIA estimated U.S. imports of Iraqi crude during the first seven months of the year at 566,000 barrels per day.
Mann said, however, that the Caspian would never completely replace the Persian Gulf and OPEC as an important source of oil.
"The Caspian has 4 percent of world oil reserves," he said.
"That's not enough to dominate the market, by any stretch, but it is enough to be an important factor in setting oil prices on the margin, if you will, in the same way that North Sea oil did in the 1970s."
The Bush administration, like the Clinton administration before it, still sees the Caspian as a promising alternative to Iraq and OPEC, and a worthwhile investment regardless of whether the Iraqi oil industry is eventually opened up to foreign capital.
However, for Caspian crude to attract a buyer, it would have to be priced at a level that covers transportation costs and is low enough to compete with oil from Iraq and other Persian Gulf suppliers.
"If you look at the Gulf reserves, there are really no transport issues," Mann said. "You run a pipeline from the field to major sea lanes, and that's done. The Caspian region, though, is landlocked."
The $2.8 billion BTC pipeline -- being built from the Azeri capital of Baku to the Turkish port of Ceyhan -- is the first major oil pipeline running west from the Caspian to the Mediterranean Sea where oil can be loaded aboard tankers destined for Europe, Asia or North America.
The Caspian Consortium Pipeline, which began pumping oil last year, links the city of Tenzig on the east shore of the Caspian with the Russian Black Sea port of Novorossiisk.
This requires tankers to pass through the Bosporus Straits before reaching the Mediterranean and sailing to their final destination.
In terms of economics, loading tankers at a Mediterranean port rather than the Black Sea makes the most sense for traders since it trims a few days off the voyage and, as a result, a few cents off the price of a barrel of crude.
Mann said that the oil industry wouldn't have gone forward with its enormous capital investments in the Caspian if its leaders thought there was a chance prices would fall to the point of being unprofitable.
"What you must pay attention to is the behavior of the companies that are putting up nearly $3 billion for this oil (BTC) pipeline, in addition to the billions that they are investing in the (Azeri) deposits," Mann said.
"So I think that's the most persuasive evidence, that regardless of where oil prices might swing in the months and years ahead, that this project will be a success."
(Reported by Hil Anderson, UPI Chief Energy Correspondent.)