UpdateConflict hampers oil exports via Georgia

11 August 2008 11:53  [Source: ICIS news]

(Releads, adds detail and update from BP in paragraphs 7-9)

By Sergei Blagov and Mark Watts

MOSCOW (ICIS news)--The government of Kazakhstan, a major oil producer in the Caspian region, indicated plans to suspend some of its supplies via Georgia on Monday following the outbreak of hostilities there with Russia over the breakaway South Ossetia region.

Kazakhstan's Prime Minister Karim Masimov told a cabinet meeting in Astana that crude oil, previously exported via Georgia's port of Batumi should be re-routed to the domestic market.

Kazakhstan used to export about 1m tonnes/year via Batumi, Masimov was quoted as saying by the government's press service.

Serik Burkitbayev, CEO of Kazakhstan's state-run oil giant KazMunaiGaz, told the cabinet meeting that the Kazakhstan-owned oil terminal in Batumi remained unaffected by hostilities.

According to a report on the Reuters newswire, however, the ports of Batumi and Supsa were operating only partially while the port of Poti was not operating at all.

Another Caspian oil producer, Azerbaijan, also suspended some of its exports via Georgia. Exports of oil and oil products via Georgia's ports of Batumi and Kalevi was halted on Sunday night, Rovnag Abdulayev, CEO of Azerbaijan's state-run oil company SOCAR, said in televised remarks.

Abdulayev also said that SOCAR was considering oil exports via the Baku-Novorossiisk oil pipeline through Russia.

Azerbaijan's oil exports had been disrupted before the Georgian crisis when a fire on 5 August disabled Turkey's section of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline.

A London-based BP spokesman said all other export routes from Baku - including a rail link to Batumi and pipelines to Supsa, Georgia and Novorossiisk on Russia's Black Sea coast - were unaffected by the conflict.

All three alternative routes were still operating as normal, though the combined export capacity was less than the BTC pipeline, he said.

BP added that reports over the weekend that the BTC pipeline had been bombed were unfounded.

Georgia has reportedly pulled its troops out of South Ossetia and suggested a ceasefire. But despite Western calls to end hostilities, Russia apparently expanded air strikes beyond South Ossetia, while Georgia reportedly shelled Tskhinvali, the region's capital on Monday.

Fighting began late last week when Georgia launched an assault on South Ossetia. Russia, which supports the breakaway province, hit back, bombing targets throughout Georgia.

Crude futures rose by close to $2/bbl in early trading in London, amid concerns the military conflict could escalate and further disrupt supplies.

At 08:10 GMT, September Brent on London ICE Futures was trading at $115.15 /bbl, up $1.82/bbl on last Friday’s settlement price, having earlier hit a high of $115.24/bbl, up $1.91/bbl

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.

($1 = €0.67)

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By: Sergei Blagov
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