BTC export alternatives on hold as Russia, Georgia clash

BP, already acknowledging a loss of significant throughput along the BTC oil pipeline, appears to be facing wider problems in the Caucasus region.

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 8 -- BP PLC, already acknowledging a loss of significant throughput along the Baku-Tiblisi-Ceyhan oil pipeline, appears to be facing wider problems in the Caucasus region after the Russian government sent troops and bombarded locations in Georgia.

The Russian incursion came Aug. 8 after Georgia earlier launched a major military offensive to retake the breakaway province of South Ossetia, threatening to ignite a broader conflict.

Hundreds of civilians were reported dead, while witnesses said the South Ossetian capital of Tskhinvali was devastated. It has been described as the worst outbreak of hostilities since the province won defacto independence in a war against Georgia that ended in 1992.

"We urge all parties, Georgians, South Ossetians, and Russians, to deescalate the tension and avoid conflict," said a White House spokesperson. "We are working on mediation efforts to secure a ceasefire, and we are urging the parties to restart their dialogue."

For BP, the sudden conflict threatened its efforts to use alternate routes and modes of transport to move crude oil from the region in the wake of the shutdown of the 850,000-b/d BTC line earlier this week.

In a research note, analyst Peter Hutton at broker NBC, said BP told him that at least 500,000 b/d of production from its fields in Azerbaijan have been cut since the line's shutdown.

In his note, Hutton said the alternative pipeline routes used by BP for the Azerbaijani crude can transport no more than 200,000 b/d, while the firm's suggestion of using Georgian railcars would be "impractical at the best of times and probably even more so during the present tensions in Georgia."

BP declined to comment on reports by traders that it issued a notice that the fire on the BV30 section of the line is still burning and that a 21-day delay has been applied to the Ceyhan lifting program from Aug. 6.

A spokesman for Botas International Ltd., which operates the Turkish sector of the line, confirmed that the fire is "still ongoing" but under control. He said the firm's main effort is to ensure that the fire does not expand.

The Botas spokesman said it remained unclear if the incident had been caused by sabotage or by a technical fault. He said the cause would be determined only after the fire has been extinguished.

In a statement dated Aug. 6 and posted on its Web site, the People's Defense Force—the armed branch of the Kurdistan Workers' Party, or PKK—said it had blown up the BTC pipeline (OGJ Online, Aug. 7, 2008).

Earlier this week, it also was reported that an attack on the BTC line is one of several options under the consideration of separatist groups in Georgia, with specially trained saboteurs ready to undertake such a mission (OGJ Online, Aug. 6, 2008).

The companies with participating interests in the Azeri-Chirag-Guneshli field include operator BP with 34.1%, Chevron Corp. with 10.2%, Socar with 10%, Inpex Corp. with 10%, StatoilHydro ASA with 8.6%, Exxon Mobil Corp. with 8%, Turkish national oil company TPAO with 6.8%, Devon Energy Corp. with 5.6%, Itouchu Corp. with 3.9% and Hess with 2.7%.

Contact Eric Watkins at hippalus@yahoo.com.

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