Energy suppliers wary of Georgia

By Amie Ferris-Rotman - Analysis

MOSCOW (Reuters) - Energy suppliers in the Caucasus and Caspian region could turn their backs on Georgia as a transit route after the country's brief war with Russia, denting confidence in the Nabucco pipeline project.

Ambitious plans for Nabucco, a U.S.- and EU-backed project that would take Azeri gas to Europe via Georgia and Turkey, bypassing and reducing reliance on Russia, are crumbling as instability scares off investors.

Caspian Sea producers are favouring Russia as their route to European markets or to China.

Ex-Soviet Georgia is a now a key energy transit route. It is at the centre of the Baku-Tbilisi-Ceyhan (BTC) pipeline, which ships 850,000 barrels per day (bpd) of high quality Azeri crude from the Caspian to the Mediterranean.

It also has three major ports on its Black Sea coast, Batumi, Poti and Supsa, which send oil products and crude to western Europe and are used by Azerbaijan, whose ports are on the landlocked Caspian Sea.

The Baku-Tbilisi-Erzurum gas pipeline (BTE), like its oil counterpart, stretches from Azerbaijan to Turkey via Georgia. Opened in 2007, it will eventually be able to carry 20 billion cubic metres (bcm) of offshore Azeri gas per year.

But faced with a now unstable neighbour, Azerbaijan is considering other routes for its oil and gas.

"Hostilities between Russia and Georgia increase the risk around the South Caucasus as a westward transit route for Caspian oil and gas, both now and over the longer term," said Tanya Costello at Eurasia Group in London.