Page 4 - FSUOGM Week 39

FSUOGM COMMENTARY FSUOGM

Risk of all-out war looms

over South Caucasus oil

and gas corridor

The South Caucasus is a major transit route for westbound Caspian oil and gas

CAUCASUS FIGHTING between Armenia and Azerbaijan of Artsakh. The two countries fought a war over
over the disputed territory of Nagorno-Kara- disputed territory in 1988 to 1994 and tensions
WHAT: bakh has continued to escalate since first shots have simmered ever since, occasionally breaking
Fighting between Armenia were fired on September 27. With the two sides out into border clashes.
and Azerbaijan raises the now accusing each other of cross-border shell-
risk of damage to oil and ing, there is a looming threat of an all-out war in Risks to oil and gas transit
gas infrastructure. a region that serves as a major transit corridor for Azerbaijan pumps the bulk of its crude oil
oil and gas supplies. through the BP-operated Baku-Tbilisi-Ceyhan
WHY: However, this risk is yet to reflect itself in (BTC) pipeline that connects offshore Azeri oil-
The two sides are oil prices, with Brent and other benchmarks fields with an export terminal on Turkey’s Med-
shelling each other over remaining relatively flat this week. This said, the iterranean Coast. At one point the pipeline runs
the disputed Nagorno- resurgence in coronavirus (COVID-19) cases is just 16 km from Azerbaijan’s border with Arme-
Karabakh territory. weighing down on demand, leaving many pro- nia. BTC carried almost 640,000 barrels per
ducers with spare capacity. World oil demand day (bpd) of crude last year, mostly consisting
WHAT NEXT: will be 7.1% lower year on year this quarter, of Azeri supplies, but also some volumes from
Major transit pipelines according to the International Energy Agency Kazakhstan and Turkmenistan.
like the BTC pipeline (IEA). Azerbaijan also supplied 9.2bn cubic metres
are unlikely to be The conflict centres around the long-dis- of gas to Turkey last year via the South Cauca-
intentionally targeted. puted Nagorno-Karabakh region, which is inter- sus Pipeline (SCP). SCP forms part of the longer
nationally recognised as part of Azerbaijan but Southern Gas Corridor (SGC) network which
broke away in 1991 and is controlled by ethnic cost BP and its partners around $40bn to build.
Armenians, who have declared it as the Republic The renewal of fighting with Armenia comes

P4 www. NEWSBASE .com Week 39 30•September•2020