Eric Watkins
Senior Correspondent
LOS ANGELES, Aug. 12 -- BP PLC, which last week had to announce the closure of the Baku-Tblisi-Ceyhan (BTC) oil pipeline, has now announced the shutdown of two other pipelines in the war-torn Caucasus region as a precautionary step.
BP said it closed the Western Route Export Pipeline (WREP), which transports oil from the Caspian port of Baku in Azerbaijan to the Georgian port of Supsa on the Black Sea, as well as the South Caucasus Pipeline (SCP), which transports natural gas from Baku to Turkey through the Georgian capital of Tbilisi.
BP has also stopped producing gas from Shah Deniz field in the Caspian Sea. The field feeds SCP. Also, according to trade sources, BP's closure of WREP forced offshore Azeri fields to cut output to 250,000 b/d from 800,000 b/d.
Closure of WREP and SCP leaves BP with only two main export options: the 100,000 b/d pipeline from Baku to Russia's Black Sea port of Novorossiisk and a railway line that could export as much as 50,000 b/d via Georgia's Black Sea port of Batumi.
A BP spokesperson, denying that either of the two pipelines had been damaged in the fight between Georgia and Russia over South Ossetia, said it had decided to stop using the lines as a precaution until the conflict died down.
Pipelines targeted?
Earlier, Georgian officials claimed that Russian warplanes had targeted pipelines and other oil-export facilities across its territory, such as the strategic Kulevi oil terminal near Georgia's Black Sea port city of Poti.
"The Russian military is posing a direct threat to the Kulevi oil terminal, the property of the Azerbaijani oil company SOCAR," said Georgian National Security Council Secretary Alexander Lomaia.
SOCAR issued a statement underlining the fact that it continues to transport oil via rail to the Kulevi terminal, which it owns, and that another tanker departed the port on Aug. 12. SOCAR also said that "oil from Azerbaijan is also being shipped via railway to the Georgian port of Batumi."
Prior to the statements about Kulevi, Lomaia also claimed that Russian warplanes had targeted pipelines in the region, including the BTC line, which was shut down last week due to an explosion and fire on a segment in Turkey.
"Russians bombed the BTC pipeline south of the city of Rustavi," said Lomaia. "We don't know yet whether it was damaged. It's the second attempt to bomb this pipeline since Aug. 10."
The claim was denied by Russian authorities, who said there had been no deliberate attempt at targeting the BTC line. According to Anatoly Nogovitsyn, deputy head of Russia's general staff, "The oil pipeline was never a target that needed to be bombed."
BP officials attempted to confirm the Georgian reports but said that, after checking, there were no reports of damage along any of the pipelines and that the pipelines would resume normal exports "when it was safe to do so."
Fighting won't stop oil flow
In something of an upbeat note, an official of Turkish state pipeline company Botas said the fighting in Georgia will not stop oil flow through the BTC line.
"Oil exports will begin when the pipeline is repaired, the fighting is not an obstacle for exports," the source said. Another Botas source said repairs may not be finished for a further 1-2 weeks.
The immediate safety of any of the pipelines, however, will be determined largely by the outcome of negotiations between the warring sides.
A step in that direction was taken on Aug. 12, when European Union leader Nicolas Sarkozy and Russian President Dmitry Medvedev endorsed a plan that calls for both Russian and Georgian troops to move back to their initial positions.
Still, Swedish Foreign Minister Carl Bildt, who is mediating on behalf of the Council of Europe, suggested that Russia had achieved its aims in Georgia and would likely dictate the terms of any further peace agreement.
"The [Russian] goal appears to be to damage Georgia militarily and economically to such an extent that its capacity to resist politically, is severely weakened. After that, I expect, political conditions [for an end to the conflict] will be dictated," Bildt said.
According to Kaan Nazli, director of emerging markets at Medley Global Advisors, the prolongation of military hostilities would deal a devastating blow to prospects of maintaining a safe non-Russian route across the Caucasus for Caspian and central Asian oil and gas.
While such a conclusion seems evident amid the hostilities, what remains to be seen is where peace—as dictated by Russia—would leave the future of the Caucasus as transport corridor for oil and gas from the Caspian region and beyond.
Contact Eric Watkins at [email protected].
