Caspian Neighbours Seek Accord on Offshore Deals

Article excerpt

The five countries surrounding the hydrocarbon-rich Caspian must resolve their conflict over the development of their seabed resources. A series of tough negotiations could lead to a convention later this year.

Russia and Kazakhstan hope that they have found a compromise over the status of the remote Caspian Sea that could resolve a stubborn conflict delaying the development of its enormous offshore hydrocarbon reserves. The resolution of the issue may well create a dependable new oil and gas industry supplying the needs of Western Europe from resources dwarfing even those of the Gulf. A meeting of experts has already been called to consider the controversy in Moscow probably during October, to be followed by a ministerial conference in November. The issue is whether the enclosed, salt-water Caspian is a sea or a lake.

If it is a sea, then the five countries bordering its shores must be entitled to exploit individually their separate seabed resources without any say in each other's affairs. If it is a lake, then they must act together in a collaborative enterprise.

Time is an increasingly urgent factor because the Caspian neighbours, Russia and Kazakhstan, as well as Azerbaijan, Turkmenistan and Iran are anxious to exploit their seabed riches. Indeed, latest discoveries indicate reserves beyond the wildest dreams of any of the states involved.

A seismic survey just carried out on behalf of the Caspian Sea Consortium (CSC) in the seabed near the Kazakhstan shore has indicated the presence of crude oil reserves estimated at 10 billion tonnes as well as 2 trillion cubic metres of natural gas. If confirmed, these offshore reserves overshadowed by the controversy between the Caspian neighbours would be ten times bigger then Kazakhstan's fabulously rich Tengiz oilfield, and would easily exceed Russia's entire proven oil reserves of 6.7 billion tonnes.

These and other resources in the Caspian region would be ideally suited for the hungry and prosperous energy markets of Europe. The legal returns of the Caspian, which divides the Caucasus region from Central Asia, has arisen since the collapse of the Soviet Union in 1991. Russia and Iran argue the Caspian is a lake under the definition of international law and its resources should therefore be exploited jointly and equally by the littoral states. The three previously neglected Central Asian republics of the former Soviet Union regard it as a sea; and they have invited their powerful neighbours to the north and the south to mind their own business. But that is no way to generate business confidence among Western investors whose contribution is essential to the development of the Caspian hydrocarbon reserves. …