Oil and gas in the capitals

The recent conflict in the Caucasus between Georgia and Russia has highlighted the supply risks in the oil and gas markets. It indirectly highlights the salience of Norway as a natural gas supplier. Indeed, Georgia is the conduit for both oil and gas pipelines from the Caspian to world markets. The most important one is the Baku-Tbilisi-Ceyhan oil pipeline, whose flow of 800,000 bpd was interrupted last August due to sabotage, not by Russians, but by Kurds. The route from Baku to Ceyhan was chosen under US pressure to circumvent both Russian and Iranian territory, even if it was more costly. Obviously, the sponsors and the investors underrated the political risk involved in crossing Kurdish areas in Turkey. The conflict between Russia and Georgia as well as the pipeline blast put the plans for a new major gas pipeline, the Nabucco project to bring Caspian gas to Europe, in a less favorable light.