The countries / regions listed in this report are:
A) Important from an energy perspective.
B) Experiencing significant economic, political, or other problems which currently (or likely in the short-term) could affect their energy sectors.
Caspian Sea Region:
The Caspian Sea region is important to world markets because it has large oil and gas reserves that are only now beginning to be fully developed.
Developing these resources has resulted in competition both between companies to get the contracts to develop this potential, and between nations to determine the final export routes.
Note: information contained in this report is the best available as of June 2000 and can change.
GENERAL BACKGROUND:
The Caspian Sea region's oil and gas potential has attracted much attention since the breakup of the Soviet Union. The nations in the Caspian Sea region - Azerbaijan, Iran, Kazakhstan, Russia, Turkmenistan, and Uzbekistan - are already major energy producers, and production will increase with additional investment, technology, and the development of new export outlets. The Caspian Sea is about 1,120 km (700 miles ) long , and contains six separate hydrocarbon basins.
Most of the oil and gas reserves in the Caspian Sea region have not been developed, and many areas of the Caspian region remain unexplored. Most of Azerbaijan's oil resources (proven as well as possible reserves) are located offshore, and perhaps 30 percent - 40 percent of the total oil resources of Kazakhstan and Turkmenistan are offshore as well.
Proven oil reserves for the entire Caspian Sea region (total country reserves, not just for the Caspian Sea itself) are estimated at 18 - 35 billion barrels, comparable to those in the United States (22 billion barrels) and the North Sea (17 billion barrels). Natural gas reserves are even larger, accounting for almost two-thirds of the hydrocarbon reserves (proved plus possible) in the Caspian Sea region.
Based upon proven reserves, Kazakhstan, Turkmenistan, and Uzbekistan each rank among the world's 20 largest natural gas countries. Proven gas reserves in the Caspian region are estimated at 236 - 337 trillion cubic feet (Tcf), comparable to North American reserves of 300 Tcf.
The prospect of potentially enormous hydrocarbon reserves is part of the allure of the Caspian region. Besides the 18-35 billion barrels currently proven, the region's possible oil reserves could yield another 235 billion barrels of oil if proven. This is roughly equivalent to a quarter of the Middle East's total proven reserves (however, the Middle East also has its own vast possible reserves).
Possible gas reserves are as large as the Caspian's proven gas reserves, and could yield another 328 Tcf if proven. However, these reserves are located far from potential markets in relatively remote Turkmenistan, Kazakhstan, and Uzbekistan.
The distance from potential markets and the relative lack of infrastructure to export this gas have tempered interest in the region's gas potential. The alternatives to exporting gas through the Russian pipeline system are exporting through war-torn Afghanistan, through Iran (where investment is limited by sanctions), or by building some of the world's longest pipelines to markets in China and Europe.
Key issues in this region include: 1) legal issues concerning ownership and development rights in the Caspian Sea; 2) regional instability; 3) development of transnational export routes to take oil and gas from the landlocked Caspian Sea region to world markets; 4) the related issue of energy exports through the Bosporus and into the Black Sea; and 5) Iranian sanctions and the role of Iran.
Export Route Issues:
New transportation routes will be necessary to carry Caspian oil and gas to world markets. The pipelines in the Caspian Sea region that were completed prior to 1997 were designed to link the Soviet Union internally, and were routed through Russia.
Most of the existing Russian oil export pipelines terminate at the Russian Black Sea port of Novorosiisk, requiring tankers to transit the crowded and ecologically and politically sensitive Bosporus in order to gain access to the Mediterranean and world markets.
Furthermore, there is some question as to whether the Mediterranean is the right place to send all of the forthcoming oil and gas from the Caspian, as oil demand over the next 10-15 years in Europe is expected to grow by little more than 1 million barrels per day (bbl/d).
Oil exports eastward, on the other hand, could serve Asian markets, where demand for oil is expected to grow by 10 million bbl/d over the next 10-15 years. Finally, there are political and security questions as to whether the newly independent states of the former Soviet Union should rely on Russia or any other country as their sole export outlet.
As a result, multiple routes for Caspian oil and gas exports have been proposed. Russia itself has proposed multiple pipeline routes that utilize Russian export pipelines that transport oil to new export outlets being developed on the Baltic and Mediterranean Seas.
President Shevardnadze of Georgia first proposed the idea of a transport corridor in 1993 to address some of these issues. The TRACECA Program (Transport System Europe-Caucasus-Asia, informally known as the Great Silk Road) was launched at a European Union (EU) conference later that year.
The EU conference brought together trade and transport ministers from the Central Asian and Caucasian republics to initiate a transport corridor on an West-East axis from Europe, across the Black Sea, through the Caucasus and the Caspian Sea to Central Asia. In September 1998, twelve nations (including Azerbaijan, Bulgaria, Kazakhstan, Romania, Turkey, and Uzbekistan) signed a multilateral agreement known as the Baku Declaration to develop the transport corridor through closer economic integration of member countries, rehabilitation and development of new transportation infrastructure, and by fostering stability and trust in the region. In addition, the EU has sponsored the INOGATE program, which appraises oil and gas exports routes from Central Asia and the Caspian, and routes for shipping energy to Europe. INOGATE is run through the EU's TACIS program.
How Much Oil Could be Exported from the Caspian Sea Region? Oil production in the Caspian Sea region is projected to reach 1.3 million bbl/d in 2000, of which about 800,000 bbl/d, mostly from Kazakhstan, will be exported. However, only about 300,000 bbl/d will be exported outside the former Soviet Union.
Production in the region is projected to increase several fold, led by three major projects currently under development in Azerbaijan and Kazakhstan. In April 1993, Chevron concluded a historic $20 billion, 50/50 percent joint venture deal with Kazakhstan to create the Tengizchevroil joint venture to develop the Tengiz oil field, estimated to contain recoverable oil reserves of 6-9 billion barrels with a peak production of 750,000 bbl/d by 2010.
In what was described as "the deal of the century," the Azerbaijan International Oil Consortium (AIOC ) signed an $8 billion, 30-year contract in September 1994 to develop three Caspian Sea fields -- Azeri, Chirag, and Guneshli -- with proven reserves estimated at 3-5 billion barrels.
Oil production is expected to reach 800,000 bbl/d by the end of the decade. Although signed with less fanfare in 1997, the offshore Kashagan block being developed by the Offshore Kazakhstan International Operating Company (OKIOC) has been reported as having oil reserves of greater than 8 billion barrels.
These projects, along with others currently underway, could help boost Caspian Sea region production to almost 4 million bbl/d, and could increase Caspian Sea region oil exports to over 3 million bbl/d by the end of the decade. By 2020, production and exports could increase by another 2 million bbl/d. Although not another Middle East, as some have claimed, the Caspian Sea region is comparable to the North Sea in its hydrocarbon potential.
Source : United States Energy Information Administration.
Please Note: Information contained in this report is the best available as of June - August 2000 and can change.
© 2000 Mena Report (www.menareport.com)
