Updated: Georgia war hits Azeri oil exports

David Osler - Monday 11 August 2008

SUPSA and Batumi, which handle crude exports from the Azeri section of the Caspian, have been reduced to partial operation as a result of fighting between Georgia and Russia in recent days. 

A third Georgian port, Poti, has had to shutdown altogether following air strikes sustained during the hostilities that broke out on Friday, an employee of local Multiport affiliate TeRo told Lloyd’s List. 

Otherwise, the situation appears to be subject to rapid changes. Russian Deputy Foreign Minister Grigory Karasin has denied speculation that his country plans to mount a naval blockade of Batumi, although he added that it may decide to search vessels entering and leaving. 

Meanwhile, Russian naval vessels have also arrived at the port of Ochamchira in breakway Abkhazia. Naval clashes have caused at least one Georgian vessel to sink. 

Georgia has also charged that Moscow has mounted air strikes on the Baku-Tbilisi-Ceyhan oil pipeline, which carries Caspian crude to the West, although Russian military commanders have denied the claim. 

To add to the mayhem, the BTC pipeline had already been damaged by a fire caused by bomb planted by Kurdish separatists last week. 

The blaze has now been extinguished, allowing the extent of the damage to be assessed, although there are suggestions that it could be out of action for around two weeks. 

Murat Lecompte, external affairs director for pipeline operator BTC Co, told Bloomberg news agency: “The fire’s out and now we’re in the cool-down period which usually takes some time. It’s still too hot to touch and we need it to cool before we can see what the damage is.’’ 

The 1,770 km pipeline, which entered service last year, has a capacity of about 1m bpd, which is more than 1% of world supply. About 250 km of its overall length passes through Georgia. 

BTC is controlled by a consortium led by Britain’s BP, which also includes Chevron, ConocoPhilips, Total and the state oil company of Azerbaijan. 

BP, StatoilHydro and other producers have cut crude production at the Azeri-Chirag-Gunashli and Shah Deniz fields in the Azeri waters. Some output is being exported through the recently reopened Baku-Supsa pipeline to the Georgian Black Sea coast, although it is understood that no tankers have loaded at Supsa during the conflict. 

TeRo employee Garsevan Jorbenadze told Lloyd’s List that while loading and discharge of tankers has been suspended at Batumi, where he is based, bulk carriers and general cargoships can still expect limited service. 

“Poti is totally closed because of a direct impact by Russian jets. The port is not badly damaged but there’s a big panic.” 

One tanker is awaiting instructions outside Supsa, while another tanker is alongside at the smaller port of Kulevi, Mr Jorbenadze added. 

Some analysts fear that continued war in region would inevitably mean the closure of BTC, which would potentially deny the West access to 1m bpd. 

Georgia has now withdrawn from South Ossetia, marking a return to the status quo, which is among Russia’s preconditions for peace talks. Georgian President Mikheil Saakashvili has urged an immediate ceasefire, although Moscow does not seem disposed to a positive response. 

As of the time of writing, there were few indications of any let-up in the fighting. Russian jets today bombed the radar station for Tblisi airport, while both artillery and aircraft bombarded the central town of Gori. 

At least 1,600 people have died since fighting started on August 7. 

Strategically speaking, Georgia is regarded as a vital link in a US-backed ‘southern energy corridor’ scheme to connect the Caspian region with world markets while bypassing both Iran and Russia. However, it has no significant oil or gas reserves of its own. 

“Russia has a very clear strategy and would prefer Europe’s gas to go via Russia and not via independent countries,” said Dieter Helm of Oxford University. “There is no definite attempt to disrupt supplies... but it is not unhelpful to Russia that there is unrest.”

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