BP-Led Oil Pipeline to Resume Shipments Next Week

By Eduard Gismatullin and Ayla Jean Yackley

Aug. 20 (Bloomberg) -- The BP Plc-led Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, will resume tanker loadings next week following fire damage earlier this month.

BP, Europe's second-largest oil company, and other exporters of Azeri oil have been unable to use the 1,768- kilometer (1,100-mile) link since Aug. 5 when a blaze engulfed the pipeline in Erzincan province in northeastern Turkey.

BP, StatoilHydro ASA and partners had to reduce production at oil fields in the Azeri part of the Caspian Sea after flows halted through the pipeline, which has a capacity of 1 million barrels a day, about 1 percent of the world's supply. The military conflict in Georgia also highlighted risks for crude oil and natural gas transportation across the Caucasus.

BTC Co., which operates the link, will start ``testing of the line today before a move to full operation,'' the Turkey- based company said in an e-mailed statement. ``This will involve some limited and intermittent flow of oil through the pipeline.''

Inspection of damage at BTC shows no sign the fire was caused by a bomb, Energy Minister Hilmi Guler said Aug. 18. He denied claims by the Kurdistan Workers' Party, a Kurdish separatist movement in Turkey, that it attacked the link as part of its campaign for autonomy in southeast Turkey.

Shipping Schedule

A statement was sent to transporters so that ``the shipping schedule can be updated today for loadings to begin next week,'' Murat Lecompte, external affairs director for BTC, said in a telephone interview. Repairs are completed and exporters will be putting oil into the pipeline, while the testing will take a few days to complete, he said.

Another pipeline, which pumps 100,000 barrels of crude a day from the Azeri capital of Baku to the Georgian port of Supsa, has been shut on security concerns because of the fighting in Georgia. Shippers declared force majeure on exports from the Supsa and Ceyhan ports, a legal clause that exempts them from meeting contracts because of circumstances beyond their control.

BP and partners also suspended for two days last week natural gas exports from Azerbaijan to Georgia and Turkey through the South Caucasus pipeline. Gas exports from the Shah- Deniz field in the Azeri sector of the Caspian Sea resumed on Aug. 14.

Russian Troops

Russia has started withdrawing its troops from Georgia after President Dmitry Medvedev announced the pullout Aug. 17. Fighting between Georgian and the Russian troops disrupted supplies of about 1.6 million barrels of oil equivalent a day from the Caspian Sea region to world markets, the Moscow-based brokerage Troika Dialog said this month.

BP isn't aware of any damage to any of its pipelines in Georgia because of fighting, Toby Odone, a London-based spokesman at the company, said today by phone.

Georgian Black Sea ports are running out of crude and oil- product supplies also because Russian military troops have blocked rail lines near the city of Khashuri, Vako Kavzharadze, a shipping agent at TeRo Co. Ltd. in the Georgian port of Batumi, said today in an e-mailed statement. Rail transportation will probably resume in three to four days.

BP, State Oil Company of Azerbaijan, or Socar, and other exporters halted crude and product exports by rail through Georgia to the Black Sea after a bridge was blown up near the village of Grakali on Aug. 16.

Rail Links

An ``alternative bridge is fixed, however Russian troops blocked the railways near the city of Khashuri,'' about 100 kilometers (60 miles) from Tbilisi, Kavzharadze said.

Anatoly Nogovitsyn, deputy chief of Russia's General Staff, denied his military was involved in the bridge attack or was blocking railways.

Azerbaijan will also export oil via Iran after routes through Turkey and the Caucasus were disrupted.

Socar awarded a tender for 300,000 tons, or about 2.1 million barrels, of Azeri Light crude for shipping to Iran by early October, an official with the Baku-based company, who declined to be identified, said by phone today.

To contact the reporter on this story: Eduard Gismatullin in London and Ayla Jean Yackley in Istanbul at egismatullin@bloomberg.net
Last Updated: August 20, 2008 08:32 EDT