The continuation and evolution of “The Great Game”, that oft-quoted 19th-century struggle for dominance between Imperial Britain and Czarist Russia, was among the topics discussed over coffee with Energy’s editor, Jeremy Cresswell, on August 4.
While it was clear then that tensions in the region were mounting, little did we then know that it was on this day that Russia first accused Georgia of using excessive force in South Ossetia and the situation began to escalate.
Of course, Georgia is not a producer state, but its geographic position has afforded it a key role as a transit route for oil&gas. Playing host to a section of the 1,100-mile Baku-Tiblisi-Ceyhan (BTC) pipeline raised this small post-Soviet state’s profile in the 1990s.
Since then, it has maintained a pro-Western posture that has antagonised its larger neighbour, Russia, and starved it of the lucrative transit fees and, more importantly, the power over the flow of at least some Caspian oil.
The eruption of conflict between Georgia and Russia and, at the time of writing, the potential for further belligerency by separatist militia elements in the region, has raised concerns for the energy industry not only in terms of the security risks posed to personnel and assets, but also with regard to economics and profit, and on a macro level, over the security of supply.
It has also amply demonstrated that the risk of war is still prevalent and can erupt with little warning in various areas of the globe, impacting on assets, to include personnel and infrastructure, as well as supply.
A plethora of unconfirmed reports in the early days of the conflict suggested that Georgia’s pipelines had been the target of Russian air strikes.
At the time of writing, this remains speculation, but on August 12, BP – which operates the WREP – announced the pipeline had not been affected, but it was shut down. It reopened only two days later, on August 14, demonstrating the robust nature of the industry.
The South Caucasus gas pipeline, which transports natural gas via Georgia to Turkey for domestic consumption, was also shut down.
Indeed, it is worthy of note that the port of Supsa, where the WREP terminates, is but 20km from the buffer zone between Georgia and its other separatist enclave of Abkhazia. The BP-operated BTC was closed prior to the outbreak of hostilities, the result of an explosion in a section in the east of Turkey.
Oil and its transportation have certainly impacted on this ostensibly separatist conflict and raised its profile in the West, in particular, and this has been played upon by the Georgian government.
Concern over the security of supply remains upmost in the minds of European states, as well as the US.
It is likely that the viability of various projects under consideration in the region, for example the Nabucco Consortium pipeline (see Economist’s Eye on Page 10), will require consideration, and while it may harden resolve from the US and other Western powers to route pipelines outside of “Mother” Russia, regional instability may also make Georgia a less attractive prospect.
What should be borne in mind is that the security risk to energy projects in this region, even at times of physical conflict, are as much about the political risks as the more traditional threat of violence.
Experience has shown that the period of political instability that is likely to follow conflict will bring with it myriad threats and complications to business and operations over and above those physical threats posed by war.
Claire Fleming is corporate relations manager, AKE