Caspian Basin Issues - Caspian Infrastructure

Published October 24th, 2000 - 02:00 GMT

Another potential constraint to social infrastructure development in Azerbaijan is Section 907 of the Freedom Support Act. Section 907 prohibits the U.S. Government from providing direct aid to Azerbaijan.  


As we have stated many times before, Exxon is opposed to unilateral economic sanctions in general. Specifically, we are opposed to Section 907 which prohibits the U.S. Government from providing direct aid to Azerbaijan.  


Simply put, Section 907 is discriminatory and should be repealed. It limits U.S. influence in the region and jeopardizes U.S. business activity in Azerbaijan.  


Unilateral sanctions threaten engagement and undermine American leadership and competitiveness. There is no justification for singling out Azerbaijan in such a manner. Engagement, not sanctions, is the best tool to advance America's interest overseas.  


The U.S. Government should establish a level playing field in the region by repealing Section 907 and allowing the same unrestricted, direct U.S. Government relief assistance to Azerbaijan that is available to all other countries of the Caspian region. 


By all accounts, the Caspian region is poised to become a major oil and gas production region and an important source of world energy supply. The region could hopefully see the discovery and development of 100 - 200 million barrels of oil equivalent reserves, production rates of 3 to 6 million barrels per day and investments by oil and gas developers of about 500 - 1,300 billion dollars.  


The success of the basin will require investments in infrastructure of at least 5 to 20 billion dollars. 


Development activity and the magnitude of capital investment could be unprecedented in the region. With multiple projects being developed concurrently, competition for industrial infrastructure could become very intense. Infrastructure development must keep pace - it will be the limiting factor in how quickly the basin can be explored and developed. 


The sheer volume of activity required might itself be a limitation. For example, fabrication of steel topsides and substructures could be a major constraint. All of the steel used in the area would be imported, either in bulk or in prefabricated form. 


Fabrication yard limitations would suggest that it would be preferable to prefabricate. However, it will be very difficult or impossible to bring in large steel structures. Providing sufficient steel fabrication capacity may be the key to the timely development of the area.  


Marine installation capability may be another constraint. With only one crane barge of any significant capacity in Azerbaijan, competition for its services could be fierce. Developers may have to find ways to share it for critical lifts only, and devise ways of constructing platforms that don't require heavy crane lifts.  


Although we are not talking about pipeline issues specifically, initial pipeline route selection will clearly be a difficult task. Beyond route selection though, fabrication and construction of pipelines may be one of the easier infrastructure developments.  


Expected production levels of 3 to 6 million barrels per day lend credence to the need for multiple pipelines on multiple routes. Production forecasts would indicate more capacity will be required for oil exports, plus new gas export pipelines once sufficient gas reserves are established.  


Finally, as industrial infrastructure is put in place and exploration and development activities progress, social infrastructure development must keep pace to attract and motivate the skilled work force and to provide the people of the Caspian region countries with direct benefits of foreign investment. 


If the quality of social infrastructure is judged to be inadequate, oil and gas developers may be unable to attract skilled technical people to the area, or may have to incur higher costs to compensate for deficiencies. These factors could contribute to higher overall development costs and a lower economic success rate for the basin.  


Clearly, the Caspian region has the potential to be a major center of oil and gas activity over the next several decades and a major contributor to oil and gas supply.  



`By K.T. (Terry) Koonce 

President, Exxon Ventures (CIS), Inc. 









© 2000 Mena Report (

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