Thursday, Aug 16, 2007

(MORE TO FOLLOW) Dow Jones Newswires

16-08-07 0847GMT

Thursday, Aug 16, 2007

(MORE TO FOLLOW) Dow Jones Newswires

16-08-07 0847GMT

Thursday, Aug 16, 2007

 
  
   By Benoit Faucon  
   Of DOW JONES NEWSWIRES  
 

LONDON (Dow Jones)--A rebel Kurdish commander says that the BP PLCBP PLC (BPBP)-led Baku-Tblisi-Ceyhan oil pipeline, responsible for shipping upward of 700,000 barrels daily to customers in the West, may become a fresh economic target if Turkish attacks continue against his armed group, a threat underscored by an independent assessment commissioned by the oil major.

"Persistent operations by the Turkish military against our guerrilla forces and continuation of oppressive policies against our people will put the security of the BTC and similar economic investments at risk," Bahoz Erdal, a commander of the People's Defense Force, said in a recent telephone interview with Dow Jones Newswires.

The Force is the armed wing of the Kurdistan Workers' Party, or PKK, a separatist guerilla organization that is seeking Kurdish independence from Turkey.

A report by an external panel commissioned by BPBP acknowledges the new risk, saying the pipeline faces "a continuing and real threat of attack by hostile actors" in Turkey, more so than the two other countries crossed by the pipeline, Georgia and Azerbaijan.

Tensions have been rising in recent weeks between Turkey and the Kurdish insurgents.

Turkey and Iraq last week agreed to try to root out the rebel group from northern Iraq, according to an announcement by Turkey's Prime Minister Recep Tayyip Erdogan and Iraqi Prime Minister Nouri al-Maliki.

Experts say BTC, the British oil giant's largest recent pipeline project, faces possible illegal syphoning of crude and attacks from the PKK, despite being buried underground.

Any serious disruption at BTC, a 30.1%-owned BPBP project that BPBP's new Chief Executive Tony Hayward personally oversaw when he headed the company's exploration and production division, would add to the challenges he faces in the U.S. in the aftermath of a deadly Texas refinery incident in 2005 and a partial shut down at an Alaska pipeline last year.

 
  
   Attack Threat  
 

The $3.6 billion pipeline, which stretches for 1,770 kilometers from the Caspian Sea to the Mediterranean, carries an average 700,000 barrels of oil a day currently.

The project, in which Azerbaijan's state-run Socar, Chevron CorpChevron Corp. (CVX) and Statoil ASA (STO) are also large shareholders, is a key alternative route to Russia for the supply of crude to the West.

BPBP said Wednesday that it expected it will ship an average 1 million barrels daily by late next year, enough to fill up to two tankers a day.

When plans for the pipeline were first first drawn up, experts emphasized the risk of attacks in Georgia and Azerbaijan, both located in the fractious region of the Caucasus.

But a report published in January by the BPBP-commissioned Caspian Development Advisory Panel says 11 attempts to syphon oil were made on the pipeline by November last year, all in Turkey.

Murat LeCompte, a communications and external affairs manager for BPBP in Turkey, acknowledged "there have been some criminal attempts to tap the pipeline.

"The amount of any oil removed from the pipeline has been negligible, and there has been no impact on production at the Azeri-Chirag-Gunashli field" that supplies the pipeline "in Azerbaijan, nor at the Ceyhan Marine Terminal," LeCompte added.

The BPBP-commissioned report doesn't name the PKK as a threat.

Still, the criminal attacks expose the pipeline's vulnerability, which the Kurdish insurgent group PKK may also exploit, said Ali Koknar, president of consultancy AMK Risk Management, which advises large corporations on security in the Middle East.

"If (criminals) can extract oil from it, then the PKK, which has better technology than common thieves," can attack it, he added.

But Koknar and other experts say BTC faces heightened risks from the PKK as tensions escalate between the Turks and the Kurdish group.

For decades, the PKK has attacked domestic refineries and pipelines in Turkey. A year ago, the group claimed credit for blowing up an Iran-Turkey natural gas pipeline, which interrupted transit for four days.

Like BTC's Turkish trunk, the Iranian route is a buried pipeline operated by the Turkish State Petroleum Pipeline Corp., or Botas.

The attack "demonstrates (the PKK's) ability to attack an international pipeline in Turkey," Koknar said.

Koknar, an asssociate fellow of Washington think-tank the Institute for the Analysis of Global Security, said that with the U.S.-led invasion of Iraq, the PKK has "borrowed improvised explosive device materials from Iraq."

The group has purchased the devices on the black market from Saddam Hussein's stockpile, Iraqi Kurds or Iraqi insurgents, and has also acquired the knowledge to build and operate them, he added.

As an example, the PKK has started to use remotely detonated explosives, a practice lifted from the Iraqi insurgency and previously unused by the PKK.

Though the Kurdish areas crossed by the pipeline aren't PKK strongholds, the PKK may be able to strike far from their main bases in the southeast, according to Turkish police.

The police said last year that the PKK was behind the bombing of tourist resorts in Western Turkey, a claim the rebel group has denied.

Koknar said he expects the group to attack BTC "when the opportunity presents itself."

 
  
   Reputational Risk  
 

The BPBP-commissioned report said that in addition to the risk of attacks, there is a risk that pipeline security officials could be too heavy-handed, staining BPBP's reputation.

The report says that Turkish security authorities have "resisted participating in the types of pipeline security and human rights training programmes that have been organised in the other transit countries."

The BPBP panel concluded "that the combination of a greater potential threat and a weaker ability to influence decision-making on security arrangements in Turkey amounts to a significant reputational risk for BPBP and BTC."

BPBP says, though, that Turkish security forces participate in E.U.-sponsored human rights programs.

BPBP's LeCompte said: "We do not comment on security matters, suffice to say that the security of our people, and the BTC pipeline are top priorities."

Spokespeople for the Turkish Ministry of Energy and Natural Resources couldn't be reached by telephone.

 
  
   Company Web site: http://www.bp.com  
 

-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com (Ayesha Daya in Dubai and Ayse Ferliel in Athens contributed to this report.)

(END) Dow Jones Newswires

16-08-07 0849GMT