C O N F I D E N T I A L BAKU 000787

SIPDIS

EUR FOR MATT BRYZA; EEB FOR STEVE MANN; DOUG HENGEL

E.O. 12958: DECL: 08/19/2018
TAGS: ENRG EPET EINT PREL AZ TX TU
SUBJECT: AZERBAIJAN'S SOCAR: OIL & GAS TRANSIT THROUGH
GEORGIA STILL SEVERELY LIMITED

REF: A. BAKU 765

B. BAKU 761

Classified By: Acting DCM Robert Garverick, Reasons 1.4 b,d


1. (C) Embassy officers met August 20 with State Oil Company
of Azerbaijan (SOCAR) Deputy Vice President Vitaliy
Baylarbayov to discuss oil and gas production and transport
in light of the ongoing security crisis in Georgia.
Baylarbayov offered the following observations on specific
export routes:

-- BTC: fire in Turkey has been extinguished. BOTAS and BP
technicians are investigating; there is no announcement yet
on the cause of the explosion. Baylarbayov said that ACG
production will be increased over the next two days and
exports via BTC will be ramped up gradually with a near-term
goal of one-half the previous flow -- or about 450,000
barrels per day. Storage facilities at the Sangachal
terminal are full; there is no more capacity.

-- Baku-Supsa (Western Route) oil pipeline: still closed
because of security concerns. Baylarbayov noted that a
tanker that had approached Supsa several days ago and
retreated because of concerns about nearby Russian naval
vessels had returned to the Supsa port on Monday. The tanker
was loaded and departed without incident for the Bosphorus.
There is now no more oil at Supsa, according to SOCAR, as the
pipeline is not operational and there are not storage
facilities at the port.

-- Baku-Batumi: oil is not flowing to this port, in which
Kazakhstan is largely invested, as the Georgian railroad is
out of service. Baylarbayov said that the Russians had
destroyed a railroad bridge nearly Tbilisi, rendering the
Georgian east-west railway non-operational. SOCAR expects
the railroad bridge to be repaired in approximately 10 days.
Further problems may exist, though, as the Georgian railroad
splits west of Tbilisi at Senaki, which has had a presence of
Russian troops. From Senaki, the railroad runs to ports at
Batumi, Poti and Kulevi. The Batumi port has some capacity
for oil storage, but only small volumes remain there.

-- Kulevi Port: oil is not being shipped to Kulevi, in which
SOCAR is heavily invested, because of the railroad
interruption. Storage facilities at Kulevi are totally
exhausted; there is no oil there to export.

-- Poti: Azerbaijan and Kazakhstan previously exported
refined products from the Port of Poti; Poti did/does not
handle crude oil exports. Baylarbayov said that the
commercial port may or may not be damaged or destroyed, but,
regardless, is not operational. Deliveries to Poti are also
disrupted because the railroad is not functioning.

-- Baku-Novorossiysk (Northern Route) oil pipeline: is
functioning at full capacity. SOCAR has been exporting
limited volumes of non-consortium oil via Novorossiysk; the
AIOC consortium had not employed this pipeline, as exports
had moved through BTC or by rail. Russians had previously
notified SOCAR that the pipeline would be taken off-line for
"technical reasons." SOCAR appealed to Transneft -- which
SOCAR management described as "cooperative" -- and the
Russians agreed to expedite repairs without interfering with
volumes of oil exports. Approximately 80,000-100,000 barrels
per day of AIOC oil is now moving through Baku-Novorossiysk,
combined with SOCAR oil.

--Shah Deniz and the South Caucasus Pipeline: now operating
nearly at pre-crisis levels, with natural gas moving to
Georgia and Turkey. In previous days, Shah Deniz production
had been scaled back, as condensate (produced in conjunction
with natural gas) could not be exported via BTC or stored at
Sangachal.


2. (C) Regarding intentional Russian targeting of Georgia's
oil and gas infrastructure, including BTC and Baku-Supsa,
Baylarbayov offered the following comments:

-- there is no evidence of Russian intentions to target or
destroy specific oil and gas infrastructure in Georgia.
Russians may have realized that targeting pipelines and ports
was unnecessary, as military operations elsewhere were
intentionally or unintentionally successful in stopping the


flow of oil and gas across Georgia's territory, at least
temporarily.

-- Russians purposely avoided targeting or damaging
foreign-held oil and gas assets in Georgia, including (in
Baylarbayov's view) BTC, Baku-Supsa, Kulevi and Batumi. It
is not surprising that the Russians targeted Georgian state
railways and the port at Poti, which could be described as
military objects.
LU