Business | Oil & Gas
Conflict in Georgia will not scare off oil investors
Conflict in Georgia has shaken but is unlikely to scare off investors in the region, drawn by its energy resources and vital oil and gas links to the West.
- Reuters
- Published: 23:46 August 13, 2008
London: Conflict in Georgia has shaken but is unlikely to scare off investors in the region, drawn by its energy resources and vital oil and gas links to the West.
Analysts agree that while the dispute has had a limited impact on the price of oil and gas, investors will be more nervous about investing in the Caspian region, questioning its reputation as means of reducing exposure to Russia.
"Situations like this lead to a general sense of instability and so I think investors will have to weigh-up chances of continuing problems in the region going forward," Jeffrey Woodruff, senior director in Energy, Utilities and Regulation at Fitch Ratings said.
Fitch downgraded Georgia to 'B+' with a negative outlook last week when Georgia launched an offensive against separatists in the breakaway region of South Ossetia.
"You wonder how much transportation risk has been mitigated or reduced by building infrastructure through more volatile regions, but it's too early to make that assessment just yet," Woodruff added.
Fighting in Georgia has skirted dangerously close to major oil and gas pipelines that provide a valued alternative to Russian supplies.
Two major pipelines feed gas and oil to Europe from the Caspian Sea, which was seen as a relatively secure supply route enabling Europe to reduce its dependence on Russian energy.
Pipeline closed
On Tuesday BP closed the Baku-Supsa gas pipeline which leads to the Georgian port of Supsa because of the conflict.
The Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which runs close to Georgia's capital Tbilisi towards the Turkish port of Ceyhan, was shut down because of an explosion unrelated to the Georgia conflict for which Kurdish separatists claimed responsibility.
A gas pipeline from Baku, through Tbilisi, leads to the port of Sukhumi in Georgia's other separatist region Abkhazia, which Russia has attacked.
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