a: Delimitation of the Caspian Sea
During the first week of August an official in Putin’s administration responsible for Caspian Sea regional issues and deputy minister of foreign affairs Viktor Kaliusin visited Iran and other coastal countries. Putin discussed Russia's position on the legal status of the Caspian Sea.
Russia considers the undefined limits of the Caspian Sea the basic impediment to broader extraction of oil and natural gas in the region. Russia declared its opposition to the notion of dividing the sea territory into national sectors, holding that this would drastically destabilize the region and intensify various problems and tensions among the Caspian Sea neighbors.
A conference of all Caspian states may provide the opportunity to discuss these fundamental issues comprehensively.The need to transport oil and gas from the Caspian Sea area to world markets necessitates the convening of such a broad discussion but probably with the participation of other interested partners outside this region. Similar issues are also not solved in the Black Sea.
b. The Oil and Gas Issue:
Construction of the Baku-Tbilisi-Ceyhan oil pipeline could progress after the Turkish government decision in late August to begin basic engineering work, route surveys, and environmental studies.
The pipeline would run from Baku, Azerbaijan, on the western side of the Caspian Sea, across Azerbaijan (some 465 kilometers) and Georgia (about 255 km) to the Turkish Mediterranean port of Ceyhan, with 1'010 km on Turkish territory. The cost of the project is estimated at US$2.4 billion.
According to the EuroPA Monthly intelligence bulletin of 13 July, to become commercially profitable in the absence of US subsidies the pipeline would need an estimated through-put of 1 million barrels a day – a figure beyond the immediate capacity of Azerbaijan.
Furthermore, proven reserves are below the 6 billion barrels on which banks are said to require a commitment before construction can start.
The letter of intent, signed by Kazakhstan President Nursultan Nazarbaev at last November's 1999 OSCE meeting in Istanbul, to ship 20 million tons annually through the Baku-Tbilisi-Ceyhan pipeline is non-binding.
Requiring access to the pipeline by the Kazakh side is not an urgent issue, since export of oil from the huge Tengiz on-shore field flows directly to the Russian port of Novorossiysk.
News of great hydrocarbon deposits at the East Kashagan concession in the northern Caspian, exclusively in Kazakh territory, re-ignited great expectations from this pipeline project, which is both of geoeconomic and geopolitical importance.
Despite the fact that experts are not hurrying to confirm the magnitude of this oil and gas reservoir, reportedly between 8 and 50 billion barrels at 4'000 meters depth, supporters of the Baku-Tbilisi-Ceyhan route have added value to the project by linking Kazakh energy resources to the opportunity to transport them through the pipeline under construction.
In criticism of the present US administration’s energy policy, the Republican candidate for US president, Governor George Bush, Jr, said at the beginning of September that he would favor transporting Caspian oil through Iranian and Russian territory, triggering outrage in official Baku and Tbilisi.
The governor’s argument is that this would be almost five times cheaper to construct. This position perfectly matches the opinion of official Moscow.
A similar big project, the Trans-Caspian gas pipeline, is proceeding in a different way from that initially planned.
Turkmenistan received pre-financing of some US$500 million to join Azeri and Turkish partners in constructing and transporting gas resources.
The problem arose when Azerbaijan, becoming a potential gas exporter in 1999 after a surprise discovery of a large deposit of natural gas at Shah Deniz, demanded a 50 percent share of the pipeline capacity, which Turkmenistan President Sapamurat Niazov expected to have entirely for his country.
Niazov proposed to Moscow an increase to about 50 billion cubic meters in five years in the hope of obtaining transit rights for Turkmeni gas through Russian territory.
The US Secretary of State’s special adviser to the CIS, Stephen Sestanovich, visited Ashkhabat, the capital of Turkmenistan on 10 July but failed to get Niazov to change his position on the Trans-Caspian gas pipeline.
However, the project will proceed in transporting Azeri gas with the agreement of Azerbaijan, Turkey, Georgia, and the US. The practical transportation is expected to start at the end of 2002 or the beginning of 2003.
US ambassador John Wolf, special advisor on Caspian energy to the US president and secretary of state, said in Ankara on 25 August that the region's countries remained ready to include Turkmeni partners if and when they were ready to join. While waiting for the decision of Ashkhabat, economic development of the East-West corridor will not be delayed.
In August and September the Russian-Ukrainian dispute on pumping of some 1 billion cubic meters of the 130 billion cubic meters of natural gas transited through Ukrainian territory to Central and Western Europe Russian by Ukrainians with highest governmental protection intensified.
Russia's Gasprom holds that the quantity is more than twice this amount. Russia already has four options to bypass Ukraine and transport its gas supplies to Poland, Slovakia, and elsewhere in Europe.
At the beginning of September the prime ministers of Russia and Slovakia – Mikhail Kassyanov and Lubomir Charach – discussed one of these options and agreed to proceed with construction of the new pipeline.
The Russian-Ukrainian dispute on gas routes and gas supplies for Kiev has broader geopolitical and geostrategic dimensions, linked particularly to Ukraine's policy of closer ties with the West, NATO, and the US.
For its part, Ukraine is in a hurry to build the Odessa-Brodi oil pipeline.
Some 500 km of this pipeline that would provide Ukraine with Azeri oil are ready. The scheme is a pipeline that transports the oil from Baku, Azerbaijan, to Supsa, Georgia, where it is loaded in tankers bound for Odessa and then transited to Brodi and the broader European oil-pipeline network.
The system's capacity is expected to be 40 million tons a year. Construction is expected to be completed in 2001.
The US oil company Frontera Resources announced proof in mid-September that Taribani oil deposits in Eastern Georgia are immense and of very high quality. The prediction is of 230 million barrels of oil during the next 25 years.
Processing of the deposits will proceed in three stages, the first by 2007, the second by 2015, and the third in 2025. Frontera Resources and the European Bank for Reconstruction and Development (EBRD) have already invested US$30 million and have pledged another US$60 million. The Georgian oil company Gruzneft is a major participant in the project.
© 2000 Mena Report (www.menareport.com)