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BP 'deeply concerned' as pipeline attack raises stakes in Azerbaijan conflict

Highlights

Azerbaijan accuses Armenia over rocket attack

Oil, gas flows continuing normally after attack

Pipelines said to be well protected

London — BP said Oct. 7 it was "deeply concerned" about the expansion of the armed conflict between Armenia and Azerbaijan over Nagorno-Karabakh and particularly the targeting of the BTC crude pipeline, Azerbaijan's main export route to world markets, after Azerbaijan accused Armenia of a rocket attack on the line.

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Azerbaijani government officials said late Oct. 6 Armenian forces had fired a cluster rocket which struck 10 meters from the BTC line in the central-western Yevlakh district, well away from the three decade-long conflict zone, and had ejected more than 300 cluster bomblets, part of an escalation in fighting that one security expert said looked set to intensify further.

However, no damage was caused to either BTC or the South Caucasus gas pipeline (SCP), which forms the eastern section of the Southern Gas Corridor route to Europe, itself due to start supplying Italy by year-end.

Armenian-controlled forces occupy Nagorno-Karabakh and seven nearby districts, some of them just 30-40 km (19-25 miles) from the BTC and SCP pipelines. Recent fighting has broadened out to cities well beyond that zone such as Yevlakh and Ganja.

A spokesman for Azerbaijan's state-owned oil and gas company Socar, Ibrahim Ahmadov, confirmed missiles believed to have been fired by Armenian forces had landed close to the two pipelines, but said neither was damaged and normal flows continued.

BP, which operates both BTC and the main oil complex in the Caspian Sea that feeds the pipeline, Azeri-Chirag-Deepwater Gunashli (ACG), said the attack had been intercepted by Azerbaijan's armed forces, but it remained concerned about the upsurge in the conflict.

BTC carries around 600,000 b/d of oil, and with ample spare capacity accommodates small volumes from regional producers such as Kazakhstan, with the crude loaded at Ceyhan on Turkey's Mediterranean coast. The price of the Azeri Light crude blend has been falling in the wake of the coronavirus, which has dampened demand for distillate-rich crudes in Europe.

SECURE ROUTE?

The pipeline is buried for most of its 1,750 km length and may have additional protections used in the industry, for example, to insulate against earth tremors. An aerial bombardment during the 2008 Russia-Georgia war over South Ossetia is thought to have targeted the line without causing any damage.

A BP spokeswoman said: "As of now, all our business operations in the region continue as normal. However, we in Azerbaijan are deeply concerned about the recent expansion of military activities within the territory of Azerbaijan targeting civilian settlements and infrastructure. We are especially worried about yesterday's reports of a missile attack which was intercepted and destroyed by Azerbaijan's air defense systems in the vicinity of the BTC and SCP export pipelines."

"While the security of all assets which BP operates on behalf of the Azerbaijan government and our partners is provided by the... government, we continue to work closely with the relevant authorities in an effort to take necessary measures to provide the protection of our personnel, operations and assets."

"We ... hope the conflict will soon find a just resolution within the territorial integrity and internationally recognized sovereign territories of Azerbaijan."

Armenian foreign ministry spokesperson Anna Naghdalyan denied the Azerbaijani statements calling them "ridiculous" and "imaginary terrorism concerns" and accusing Azerbaijan of trying to import foreign fighters, seemingly a reference to claims Turkey has funneled fighters to Azerbaijan.

ESCALATION FEARS

Azerbaijan's plans to supply gas to Europe are underpinned by BP's 2018 startup of phase 2 of the Shah Deniz gas field, which will allow an additional 16 Bcm/year of shipments, expected to comprise 6 Bcm/year to Turkey, 8 Bcm/year to Italy and 1 Bcm/year each to Greece and Bulgaria.

The SCP is expected to supply 36 million cu m/d to Turkish consumers this coming winter and 11 million cu m/d to Italy from November onward, according to Platts Analytics, as well as supplying neighboring Georgia.

Lawrence Scott Sheets, an expert on the region and president of Eurasian International Analytics, told Platts he expected the conflict to escalate further, but also questioned whether Armenian-backed forces could inflict serious long-term damage on the BTC route. The goal of such attacks is "to rattle Azerbaijan more than anything else," he said. "It's pretty well protected."

He also played down any notion of offshore oil facilities coming under attack, saying that would be at the "outer limit" of Armenia's military capability.

"These things are done more for news value and psychological value than anything else," Sheets said. "They call into question the security of the route. This has been a recurring theme over the years."