Two coinciding events in the oil industry point investors to a little-known opportunity in Southeast Asia, says emerging markets expert Irwin Greenstein.

While the Georgian conflict grabbed the headlines, a related news piece out of London was all but buried. To see the entire opportunity, however, you really need to follow the bread crumbs, which lead you to Southeast Asia.

It’s all about logistics, says Irwin. In particular, the challenge now facing China of sourcing reliable supply of oil that doesn’t rely on pipeline transportation.

Oil giant BP PLC announced it shut down an oil pipeline that runs through Georgia as a precautionary measure against the violence. The 90,000-barrel-a-day pipeline to Supsa on Georgia’s Black Sea coast from Baku in Azerbaijan will remain closed indefinitely, although there is no apparent damage.

BP’s shutdown follows the closure of a pipeline operated by the company in the former Soviet Republic. It’s the larger Baku-Tbilisi-Ceyhan pipeline, knocked out of action after a fire last week on its Turkish stretch. This pipeline usually provides about 1 million barrels of crude to international markets.

What the IEA Said

At about the same time BP released its announcement, the London-based International Energy Agency said reduced oil consumption is expected to keep prices sliding from this year’s record highs.

U.S. and European consumers have reacted to the nose-bleed prices of oil by simply cutting back. At the same time, OPEC continues to pump more crude. The result is that oil prices have retreated around 20 percent since topping a record $147 a barrel in July.

China Bucks the Trend

The IEA noted that China is still bucking the trend toward reduced consumption. China has become the world’s second largest oil consumer, trailing the U.S. The IEA forecast Chinese demand will grow by 5.6% in 2008 and 5.7% next year.

What do these two, apparently unrelated news stories have to do with Southeast Asia?

In a word: logistics.

Global skirmishes make pipelines more vulnerable. For China, the challenge is sourcing reliable supply of oil that doesn’t rely on pipeline transportation. As it turns out, that source is right in China’s backyard: southeast Asia.

20 Billion Barrels of Crude

With 39,000 miles of coastline, nearly every country in the region is surrounded by water - offshore oil fields ready to give up their 20 billion barrels of crude. That’s 40 years’ worth of Saudi imports.

In 2003, Southeast Asia accounted for 13.6 percent of world oil production and 21.6 percent of gas production. As a source of energy, the region is super-hot. It’s set to grow 84 percent by 2008 to more than 2 billion barrels a year — matching OPEC’s exports to the United States.

Just last year alone, 230 exploration wells were sunk in Southeast Asia - leading to 40 new discoveries of oil and natural gas. Here are the region’s leading energy providers:

1. Vietnam is emerging as the fourth-largest oil producer in Southeast Asia.

2. Singapore supplies 60 percent of the world’s jack-up offshore rigs. These $180 million behemoths are in high demand after years of devastating hurricanes, tsunamis and typhoons.

3. Indonesia is the only Asian member of OPEC. About 80 percent of U.S. investments in the country are in energy.

4. Brunei Darussalam is a bustling hub for oil and gas concerns. In 2003, oil and gas contributed to 39 percent of the GDP and 87 percent of exports. The non-energy sector makes up 60% of economic activity, mostly in manufacturing and construction.

One way to get into these as an investor is through ETFs that bundle the best stocks available in each country. The timing right now may be in your favor.

Inflation is ripping apart some of these markets, despite surprising strong fundamentals. Some bargains may be available.

If in fact the IEA’ projection are correct about lower oil prices, this could be enough send emerging markets back up again sooner rather than later.