BP PLC (BP) Tuesday halted oil and gas pipeline flows through Georgia, confirming fears that the conflict in the Caucasus Russia could disrupt global supplies. The interruption was made before Russia announced it was ending military operations in Georgia. But it comes after the Caucasus country claimed Russia had bombed the pipelines and another route in Turkey was shut down.
The events have now cut off the bulk of an oil and gas route, estimated at up to 1.6 million barrels of oil equivalent per day and initially designed to bypass Russia.
BP said it was temporarily closing the Baku-Supsa line, of which it is the largest shareholder. The line carries an estimated 150,000 barrels a day of crude from Azerbaijan to the Georgian port of Supsa.
The route had been used as an alternative to the Baku-Tbilisi-Ceyhan, or BTC, oil pipeline, which carries 850,000 b/d and was shut down last Wednesday following a fire.
BP Tuesday also said it was interrupting flows from its Azerbaijan natural gas field to the South Caucasus Pipeline, or SCP, which crosses Georgia.
SCP carries production from Shah Deniz, where output was in excess of about 14.2 million cubic meters of gas a day at the end of 2007. BP, which operates both SCP and Shah Deniz, said that gas flow continues on the Turkish side.
The shutdown of the Baku-Supsa pipeline means BP is running out of options to replace the 850,000 b/d BTC route.
It is now using railroads to export oil from Azerbaijan through Georgia. The Georgian port of Batumi can receive an average 200,000 b/d via rail. The other remaining route for BP's Azerbaijan crude goes to Russia - ending at the port of Novorossiisk - and has a 100,000 b/d capacity.
Analysts say Georgian disruptions will benefit Russia as an international oil supplier.
Robert Johnston, director of energy and natural resources at consultancy Eurasia Group, late Monday said in a conference call that the Russia-Georgia conflict will help Russia maintain a stranglehold on Central Asian oil and gas exports.
"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."
A BP spokesman said the decision to shut down the pipelines in Georgia was taken before Russian President Dmitry Medvedev ordered an end to operations in Georgia Tuesday. The company said it was based on news flow about the conflict.
News agencies earlier Tuesday reported that Russian warplanes were bombing the Georgian town of Gori, expanding operations outside the South Ossetia region where the conflict had started.
The BP spokesman denied any connection between the decision to shut down the oil pipeline and Georgian claims that the two oil routes had been bombed by Russia.
Russia denies the attacks and BP said it has no evidence of damages on the pipelines