Georgia conflict threatens Europe energy supplies

08 August 2008 15:41  [Source: ICIS news]

LONDON (ICIS news)--The conflict which has broken out in the South Ossetia region of Georgia on Friday could have detrimental effects on energy supplies to Europe, industry players said on Friday.

Georgia, which has no significant oil or gas reserves of its own, is a key transit point for oil from the Caspian and central Asia regions to Europe and the US, the only route which avoids Russia and Iran.

The Baku-Tbilisi-Ceyhan pipeline, which is led by BP, was opened in 2006 and can pump up to 1m bbl/day of Azeri crude to the Turkish port of Ceyhan.

About 249km of the route passes through Georgia, parts of it very close to South Ossetia, where the conflict has erupted.

The pipeline was attacked last week in Turkey by Kurdish separatist rebels. On Wednesday, BP declared force majeure on loadings of Azeri light out of Ceyhan after transmission along the pipeline was halted.

The Baku-Tbilisi-Erzurum pipeline, which is jointly operated by BP and StatoilHydro, takes gas from the Shakh Deniz gas field in the Caspian Sea to Erzurum in Turkey. It began exports in 2007 and is scheduled to be able to carry 20bn cubic metres/day of gas.

Georgian President Mikhail Saakasvili told media that 150 Russian tanks and other vehicles had entered South Ossetia, while reports from Georgia claimed Russian jets attacked an airport near the capital Tbilisi.

Moscow's Defence Ministry told Russian news agency Interfax that more than 10 of its peacekeeping troops in South Ossetia had been killed and 30 wounded in the Georgian offensive.

At least 15 civilians were also reported dead, according to televised reports from the BBC.

Russia rejected claims its fighters had attacked Georgian targets and that any had been shot down.

Nato, the US and the EU have all called for an immediate end to hostilities.

Finland’s foreign minister and current chairman of the 56-nation Organisation for Security and Cooperation in Europe (OSCE), Alexander Stubb, said the intense fighting risked escalating into a full-fledged war.

The OSCE has called a special meeting later on Vienna and would send a special envoy to Georgia immediately, he added.

US crude oil futures fell more than $4/bbl despite the fighting in Georgia, as the dollar rallied on concerns about Europe and Asian economic slowing.

  

NYMEX crude was at $116.02/bbl at 14:14 GMT.

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By: Hilde Ovrebekk
+44 20 8652 3214

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