BP declares force majeure on WREP, SCP systems

BP said a force majeure has been declared on liftings of oil from the 150,000-b/d Western Route Export Pipeline, while supplies of gas through the South Caucasus Pipeline can continue to flow gas into Turkey for 7 days.

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 13 -- BP PLC said a force majeure has been declared on liftings of oil from the 150,000-b/d Western Route Export Pipeline (WREP), while supplies of natural gas through the South Caucasus Pipeline (SCP) can continue to flow gas into Turkey for 7 days.

BP closed the WREP and SCP on Aug. 12 after Georgian officials issued reports of Russian air attacks on or near the lines. On its web site, the Georgian energy ministry said that WREP "was repeatedly bombed by Russian military forces (near the capital Tblisi)." It said, "This time rocket bombs have been used."

Earlier, on Aug. 9, the Georgian government said, "Russia air forces attacked the [Baku-Tbilisi-Ceyhan] (BTC) pipeline and Baku-Tbilisi-Erzirum pipeline lying parallel to it—the two main energy projects of the country." The government report claimed that "28 out of 30 bombs exploded with some of them in the direct proximity to the pipeline, just 5 m away."

Russian officials, who have denied the reports, said they have no intention of targeting the pipelines but held open the possibility of accidents interfering with the lines' operations.

"The Russian Defense Ministry has no plans to bomb the pipeline in Georgia," said deputy chief of Russian armed forces general staff Anatoli Nogovitsin at an Aug. 11 press conference. However, he voiced "deep concern" over the possibility of "ecological catastrophe."

BP spokespersons have consistently said the firm had no knowledge of any bombings on or near its pipelines. But BP has reportedly confirmed knowledge of the incident reported by the Georgian energy ministry, while repeating that the pipeline is not damaged.

The BTC line has been out of action following a recent explosion and fire that occurred in the line's Turkish sector. Officials said damage to that line can now be inspected but gave no timetable for resuming its operation.

Hostilities in Georgia have now largely shut down an oil and gas route, initially designed to bypass Russia, estimated to carry as much as 1.6 million boe/d. In early August, exports of Azeri, Kazakh, and Turkmen oil and products from and through Azerbaijan stood at around 1.3 million b/d before falling to 350,000 b/d during the week ended Aug. 8.

Uncertain future
Closure of the three pipelines—the main showcase of BP activity in the Caucasus—underlines the uncertain future faced by the company in the region as well as by the region itself as an alternative energy corridor to the routes dominated by Russia.

Robert Johnston, director of energy and natural resources at consultancy Eurasia Group, said during an Aug. 11 conference call that the Russia-Georgia conflict will help Russia maintain "a stranglehold" on Central Asian exports of oil and gas.

"Georgia's reputation as a safe alternate route for pipelines bringing oil and gas from (Central Asia) into the Mediterranean has been compromised," he said. "If you take the Georgian option off the table…it plays into Russian hands because most of the other viable options go through Russian territory."

That point was partially confirmed as BP, faced with the shutdown of its three main lines across Georgia, had to turn to alternative routes.

While one route consists of rail transport across Georgia to the port of Batumi, the other remaining route for BP's Azerbaijan crude goes from Azerbaijan via Chechnya to the Russian Black Sea port of Novorossiisk.

The need to utilize the Russian route represents a reversal of policy—if not an outright failure of that policy—particularly for countries such as Azerbaijan and Kazakhstan long concerned about using or routing pipelines through Russia which gives Moscow control over their oil and gas flows.

According to analyst Global Insight, events of the past week will undoubtedly prompt Azerbaijan and Kazakhstan "to consider diversifying their supply routes more significantly, as it has highlighted the risks both countries face in transporting their oil to international markets."

Meanwhile, BP said it could take a week to judge how long the BTC line will remain closed after last week's explosion and fire. It said that Turkish pipeline operator Botas has started assessing the damage, with a view to assessing its cause.

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) said it had blown up the BTC line (OGJ Online, Aug. 7, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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