Caspian Crude Barely Flowing (BP, CVX, STO, E, TOT, COP, HES)

By Douglas A. McIntyre Updated Apr 27, 6:37PM EDT · Published Sep 22, 10:55AM EDT

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Oil_gas_pipeline_pic Oil is trading sharply higher this morning, partly because of oil pipeline and delivery disruptions. Platts reported that crude oil flows through the BTC pipeline have dropped from about 800,000 b/d to 250,000-280,000 b/d. The cause of the reduced flows is the shut-in of about 60% of production in a field operated by BP plc (NYSE:BP). The shut-ins followed the appearance of gas bubbles in the sea around one of the platforms.

The BTC pipeline originates in Baku, Azerbaijan, and can transport upto 1 million b/d of crude to Ceyhan, Turkey, where the crude is loadedon ships for transport. BP owns about 30% of the pipeline andis the pipeline operator. The national oil company of Azerbaijan,SOCAR, owns 25%, and other partners include Chevron (NYSE:CVX, about9%), Statoil/Hydro(NYSE:STO, about 9%), ENI (NYSE:E, 5%), Total(NYSE:TOT, 5%), ConocoPhillips (NYSE:COP, 2.5%), and Hess (NYSE:HES,about 2.4%).

Four unsold cargoes, totaling 3 million barrels, have been canceledso far, and there is no information concerning a resumption of fullproduction. Storage facilities at both ends of the pipeline are verylow and are unlikely to sustain even the reduced shipments.

Taking more than 500,000 b/d off the crude market is far more likely tohave an impact on crude prices than the knock-on effects felt by theindustry last Friday. As we’ve pointed out earlier today, there was norelationship between the proposed US government bank bailout andFriday’s rise in oil industry stocks. That upward move was just arising tide lifting all boats. Falling production from the Caspian isgoing to cause some of those boats to take on real water.

Paul Ausick
September 22, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.