Pipelines and Politics

By Land, Thomas | The Middle East, January 1996 | Go to article overview

Pipelines and Politics


Land, Thomas, The Middle East


With reserves second only to those of the Persian Gulf, the Caspian region is expected to export perhaps 2m barrels of oil a day to Western Europe by the turn of the century. Several new oil and gas pipelines linking the region with the world markets should thus reduce Europe's dependence on the notoriously turbulent oil markets of the Middle East, curb Moscow's post-colonial economic control over newly independent Caspian republics and protect their exports from potential interference by the political and religious masters of Iran.

THE FIRST OF SEVERAL BIG PIPE line engineering contracts intended to open up the hydrocarbon reserves of the Caspian Sea to the world energy markets has been signed.

The Willbros/Saipem joint venture has won a contract from the Caspian Pipeline Consortium for Phase One in the construction of a $400m, 155-mile, 40in link to carry crude oil from Azerbaijan and Kazakhstan as well as Russia, linking Kropotkin in Russia to a new Black Sea oil terminal north of Novorossiysk. The contract covers detailed engineering procurement and construction, which will start this month and last a year.

This is a companion project linked to a much bigger scheme announced by the Azerbaijan International Operating Company, a British-led consortium of companies. Its programme calls for a $3 billion, 1,616-mile pipeline connecting the Tengiz field of Kazakhstan and Chiraq in Azerbaijan with the Mediterranean port of Ceyhan in Turkey.

In addition, the American oil company Unocal as well as Delta Oil of Saudi Arabia have just signed a deal for the construction of a $3 billion, 812-mile natural gas pipeline from Caspian production fields of Turkmenistan to Pakistan via Afghanistan. Yet another, $5 billion Caspian oil pipeline to the Indian Ocean via Afghanistan is also under active consideration by Unocal and Delta.

All these plans will create lucrative business opportunities for international shipping, construction and engineering companies. The landlocked Caspian region is estimated to hold oil reserves in excess of 50 billion barrels as well as huge natural gas reserves. The Unocal/ Delta scheme coincides with the discovery of more than 27,000bn cubic feet of gas just confirmed in a single exploration block in Turkmenistan.

Members of the Western-led consortium are British Petroleum and Amoco, Lukoil, Pennzoil, Ramco, Statoil, Turkish Petroleum, and McDermott as well as Unocal and Delta. The Caspian Pipeline Consortium comprises governments of the Russian Federation, the Republic of Kazakhstan and the Sultanate of Oman.

These plans aim to break the economic stranglehold still exercised by Russia, to the north, on the underdeveloped Caspian republics -- the remote and hitherto desperately neglected former Soviet Central Asia.

The American members of the Western consortium had earlier rejected an Iranian proposal to provide access for the Caspian hydrocarbon exports to the world markets through a pipeline crossing its territory to the south.

Likewise, Russia has made it clear that it would not tolerate the construction of an oil pipeline through Turkey in the absence of the companion project providing equal access through its own Black Sea port.

The young republics themselves welcome the pipeline developments as their only chance for economic as well as political and even religious independence from their powerful neighbours to the north and south.

But it is still far from assured. Both Russia and Iran argue that the Caspian is a lake rather than sea, challenge the concept of national rights over territorial waters and claim a collective right of veto over any hydrocarbon project in the area.

With reserves second only to those of the Persian Gulf, the Caspian region is expected nevertheless to export perhaps 2m barrels of oil a day to the prosperous, energy-deficient markets of Western Europe by the turn of the century and to remain a dependable supplier for at least four decades.

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