Reports noted that the Baku-Tbilisi-Ceyhan oil pipeline (BTC) would remain shut for about 15 days after an explosion sparked a fire in a section of the pipeline in eastern Turkey on August 7. The supply concerns pushed oil prices over $119 a barrel. The fire-hit Azeri-Turkish oil pipeline was also closed for about 1-2 weeks due to a blast which occurred late August 5 in a pump at a section near the eastern town of Refahiye, Erzincan province. Light, sweet crude for September delivery advanced $1.64 to $120.20 a barrel on the New York Mercantile Exchange, after earlier rising as high as $121.78.

British Petroleum stated on August 7 that BTC partners had declared force majeure on exports due to the blaze, freeing themselves from contractual obligations. It noted that crude slated for the Turkish port of Ceyhan was being diverted to other routes, including to the Georgian port of Supsa, after the explosion. The BTC pipeline pumps one million barrels a day, equivalent of more than 1 percent of world supply, from fields in the Azeri sector of the Caspian Sea to Ceyhan on the Turkish Mediterranean coast.

Reports noted that Western alarm was growing over the threat that the Georgian-Russian conflict posed to the BTC oil pipeline that delivers oil and gas from Central Asia to Europe and the United States. While Georgia had no significant oil of its own, a 249km (154mile) stretch of the BTC pipeline ran through the country, bypassing Russia, and carried oil and gas from Azerbaijan for consumption in the West. Parts of the $3 billion pipeline, opened the previous year and built by a consortium of Western oil firms led by BP, were just 55km from South Ossetia.

BP on its part played down claims by Georgia that Russian warplanes had staged a bombing raid near the pipeline. The company insisted that the fighting posed no threat to the underground pipeline, but it said that an investigation had been started into the cause of a mysterious fire that broke out on the Turkish section of the pipeline just 48 hours before fighting began in South Ossetia. The company stated that all oil exports bound for the West via Georgia had been suspended as supplies that had initially been diverted to another pipeline, Baku-Supsa, for export by sea could not be collected because of the security situation. They were being held in storage at Supsa, a Georgian port terminal on the Black Sea1.

• 1. “Georgia: Europe fears for oil supply as clash threatens pipeline”, Timesonline, August 11, 2008, at http://business.timesonline.co.uk/tol/business/industry_sectors/natural_...