Britannia Radio

From The Times

August 11, 2008

Georgia: Europe fears for oil supply as clash threatens pipeline

Robin Pagnamenta, Energy and Environment Editor

Western alarm is growing over the threat that the conflict poses to a critical oil pipeline that delivers oil and gas from Central Asia to Europe and the United States.

While Georgia has no significant oil of its own, a 249km (154mile) stretch of the Baku-Tbilisi-Ceyhan pipeline runs through the country. This by-passes Russia, carrying oil and gas from Azerbaijan for consumption in the West. Parts of the $3 billion pipeline, opened last year and built by a consortium of Western oil firms led by BP, lie just 55km from South Ossetia.

BP played down claims by Georgia that Russian warplanes had staged a bombing raid near the pipeline over the weekend. The company insisted that the fighting posed no threat to the underground pipeline, but it said that an investigation had been started into the cause of a mysterious fire that broke out on the Turkish section of the pipeline just 48 hours before fighting began in South Ossetia.

The fire, which was still burning yesterday and led to the pipeline’s closure, started on Tuesday at one of about 90 valves that control the flow of crude oil. Kurdish rebels from the separatist PKK group later claimed responsibility for the attack, which took place at Refahiye, in the Erzincan province of Turkey, several hundred miles from Georgia. However, the incident took place outside the PKK’s normal area of activity.

BP said that all oil exports bound for the West via Georgia had been suspended as supplies that had initially been diverted to another pipeline, Baku-Supsa, for export by sea could not be collected because of the security situation. They were being held in storage at Supsa, a Georgian port terminal on the Black Sea.

The head of Azerbaijan’s state oil company said that oil exports had also been halted via the Georgian ports of Batumi and Kulevi because of the fighting. Georgian officials earlier said that Russian aircraft had attacked an oil terminal at the port of Poti.

The temporary closure of the pipeline forced a cut in production of the high-quality-grade Azeri light crude by about 450,000 barrels per day.