Caspian Sea: Oil And Politics, Is It Worth It?

1
Caspian Sea Oil And Politics, Is It Worth It?

• By Cathie Carlson

2
Can the Caspian Sea Be Our Savior?

• The Caspian sea is an untouched region of
  potentially big oil resources. The newness of
  this region could alleviate problems that would
  result from a cutoff of 25 of oil imported to
  the U.S. thereby giving the U.S. a respite in its
  oil imports while it tries to create a less oil
  dependent nation.

3
The Oil problem will get worse before it gets
better

• Problems with the Caspian Sea area
• Geopolitics
• Pipelines
• Oil dependence from other countries
• The lack of desire on the part of Americans to
  look for alternative means

4
Geopolitics and Pipelines

• Five countries border the Caspian sea and each
  have their own agendas regarding the politics in
  the region

5

• Each of the five countries as well as their
  neighbors and other countries have their own
  agendas especially when it comes to the pipelines
  
• Russia
• Kazakhstan
• Turkmenistan
• Iran
• Azerbaijan

6
The players include

• The Five Caspian Sea Neighbors
• The United States
• China
• Turkey
• Other Regional Neighbors like Pakistan,
  Afghanistan, and India
• The Oil Companies

7
Oil Dependence from other countries

• Its not just the United States who is seeking
  more and more oil to meet its needs
• Other countries, especially Asian countries, are
  going to have additional oil needs in the coming
  decades
• China and India with their large populations are
  going to exceed the U.S. demands for oil in the
  coming years

8
Lack of desire to shift to new resources

• Americans equate cars and driving with freedom
  and oil is needed to drive cars
• Americans demand less dependence on Mid East oil
  but are not as willing to alter their daily
  habits

9
What the Caspian Sea Oil Provides

• Benefits via the Caspian sea
• Provides a safety net while other energy
  alternatives are being researched and developed
• The U.S. would be less dependent on the Middle
  East and the fragile political structures that
  control that regions oil

10
The Geopolitical and Pipeline Concerns
11
The Caspian Sea

• Facts and Figures
• The Caspian Sea is 700 Miles Long
• It contains an estimated 200 billion barrels of
  oil and up to 300 trillion cubic feet (Tcf) of
  natural gas

• Much of the area remains unexplored and
  unexploited
• Five countries border the sea
• The sea is actually a lake as it has no ocean
  outlet
• Disputes over control of the resources and
  boundary issues exist

12
The Caspian Sea
13

• Problems
• There are only estimates as to the reserves no
  one really knows how much oil exists
• Political instability exists in the region
• Pipeline security is questionable

• Pipelines to get the oil out have become a
  political issue
• China and the United States have their own
  agendas as to who should get the oil and where
  the pipelines should go

14
1. Russia
15
Russia has the most influence in the region

• The Soviet Union controlled most of the region
  and only had to share a border with Iran.
• Now four of the current countries surrounding the
  Sea were once part of the Soviet Union

• Countries like Turkmenistan and Azerbaijan are
  heavily dependent upon Russia
• Russia controls the only current pipeline from
  the Caspian Sea

16
Russia Wants to Maintain its Influence

• Russia has maintained pipeline supremacy in the
  region
• Since 1991, Russia has made a concerted effort
  to ensure that existing pipelines continue
  routing through Russia, and it has largely
  succeeded.
• All current pipelines pass through Russia
• The pipeline from Baku and the pipeline from
  Kazakhstan have all been routed to Russian oil
  terminals in the Black Sea
• Russia has maintained this supremacy by
  encouraging countries to take advantage of the
  current system rather than investing in a new
  pipeline system

17
2. Iran
18
Iran could be a key player

• Where Iran once bordered only the Soviet Union,
  it now shares its borders with three newly
  created states, two of which border the Caspian
  Sea Azerbaijan, Turkmenistan
• Iran is the only country bordering the Caspian
  Sea to be a member of OPEC

19
Axis of Evil The U.S. v Iran

• Since the 1979 hostage crisis in Tehran, the U.S.
  has labeled Iran a terrorist state, a label which
  was repeated in the 2002 State of the Union
  address
• The U.S. vigorously opposes any contact with Iran
  

• The U.S. has imposed sanctions against Iran and
  U.S. companies are prohibited from accessing any
  oil or investing in any oil fields in Iran
• The U.S. discourages the laying of oil and gas
  pipelines through Iran

20
3. Kazakhstan
21
Potential Oil Giant

• Kazakhstan boasts the third largest deposits in
  the world after the Middle East and Russia
• There are 10bn-17illion barrels of proven oil
  reserves and some estimates claim there are about
  another 70 billion barrels worth of oil
• Three quarters of the Caspian Sea lies under the
  Kazak sector

22
With Existing Pipelines

• An existing pipeline from Kazakhstan through
  Russias Black Sea port makes this country one of
  the most stable in the region
• Kazakhstan is landlocked and must rely on
  pipelines to get its oil and gas out of the
  country

23
And Heavy Ties With Russia

• The only existing pipelines for oil and gas are
  Russia pipelines that go through Russian
  terminals thus making Kazakhstan and the other
  countries heavily dependent on Russia

24
And Heavy Ties With Russia

• Russia and Kazakhstan share a border and share
  the boundaries for their oil and gas fields in
  the Caspian Sea which only increases the ties
  between the two countries
• Kazakhstan signed a collective security agreement
  after it gained its independence but recently
  refused to increase military cooperation with
  Russia

25
4. Turkmenistan
26
Future Uncertain

• The U.S. Department of Energy estimates
  Turkmenistans proven oil reserves at 546 million
  barrels
• More than 20 of its reserves are under
  production

• The countrys oil output remains a fraction of
  what it was during the Soviet era
• Oil refining will become a larger sector of its
  economy than oil production

27
Pipelines Critical

• Today, Turkmenistan relies almost exclusively on
  Russias pipeline network for its oil and gas
  exports
• A more convenient line through Iran has been
  proposed
• This line would only require 100km of pipes to
  link Turkmenistan to Irans pipeline network

28
5. Azerbaijan
29
Russia, Iran and the U.S.

• Russia
• As a former Soviet state, Azerbaijan has many
  links with Russia
• These links include one of the new pipelines
  Russia built that goes from Baku through Russian
  terminals to the Black Sea

30

• Iran
• Only 100 kilometers of pipeline would be needed
  to link Azerbaijan to Irans pipeline networks to
  the Persian Gulf
• Iran would prefer to import oil for its northern
  regions (supplied by Azerbaijan) so it could free
  up its southern oil fields for export via the
  Persian Gulf

31

• The United States
• Azerbaijan does not currently supply oil to Iran,
  instead it sends its oil through pipelines from
  Turkey to the Mediterranean Sea
• The Baku-Ceyhan pipeline is favored by the United
  States
• This pipeline would run from Baku to the Turkish
  Mediterranean port of Ceyhan
• As a result of the September 11th attacks, this
  proposal has been give new life and construction
  of the almost 3 billion pipeline may begin soon

32
Pipeline Turmoil Geography, Politics and
More
33
Why are pipelines such a big deal?

• In landlocked central Asia there is no point in
  pumping oil and gas if you cannot get it to
  market. All the pipelines in the area run over
  Russian soil and, until now, the Kremlin has been
  playing hardball limiting the access to pipelines
  and charging usurious tariffs.

34
Which Way to Go?

• There are four pipeline options
• North-Northwest
• Westbound
• Eastbound
• Southbound

35
Pipelines in the Region
36
North-Northwest Linking pipelines to Russias
existing system

• Pro
• Russia has an existing system
• This is the easiest option and the fastest way to
  to transport oil and gas out of the region

• Con
• Its system is complex and poorly maintained
• The countries who have used this system resent
  Russias control of the export market and hard
  currency
• Many of the countries would prefer to bypass
  Russia altogether

37
Russias Pipelines
38
Westbound Baku-Ceyhan

• Pro
• Most favored option by the U.S.

• Con
• Expensive
• Target is primarily Europe and companies are wary
  of investing in a mature market with limited
  growth

39
Eastbound Long-distance pipelines used to
transport oil to China and eventually
Asia-Pacific

• Pro
• An 1,800 mile proposed pipeline from Kazakhstan
  and a 4,200 mile proposed pipeline from
  Turkmenistan to China would be the most direct
  way to link Central Asia and the Far East

• Con
• This is the most expensive and geographically
  difficult alternative

40
Southbound Two pipelines one to Iran and
another to Pakistan and India though Afghanistan

• Pro
• Pipeline through Iran is the most economical of
  all options
• Pipeline to India would ease burden on that
  energy hungry country

• Con
• The U.S. opposes any pipeline through Iran and
  therefore few investors have been attracted
• India wants to bypass Pakistan completely

41
The Other Players The U.S., China, and the
Oil Companies
42
The United States

• The United States is trying to create ties with
  some of the former Soviet countries in order to
  contain Russian dominance in the region
• Ironically, the U.S. presence in the region due
  to September 11, has eased some of the pressure
  to follow Russias lead by some of the Caspian
  states

43
The United States, ctd.

• U.S. presence has been seen by some to provide an
  excuse to side with the U.S.
• Unfortunately, the U.S. policies against Iran
  have locked U.S. companies from that market. An
  Iranian pipeline would only harm the companies
  even more

44
China

• China will increasingly be searching for oil
• The Asia-Pacific region as a whole is dependent
  on Middle East oil
• More than 90 of the regions oil comes from the
  Middle East as opposed to 25 of the United
  States oil

45
China, ctd

• Kazakhstan as Chinas neighbor and as the nation
  most dependent on a foreign countrys pipeline is
  just as likely to look East as to look West to
  sell its oil

46
The Oil Companies

• All the large oil companies have expressed
  interest in investing in the region
• The oil companies are expected to invest the
  billions of dollars to create and maintain the
  needed pipelines
• Politics have added difficulties to the
  investment possibilities in the regions

47
ExxonMobil Sites
48
The Oil Companies, ctd.

• U.S. oil companies are prohibited from investing
  with Iran
• But other companies are not
• Political instability in the region makes
  companies hesitant to invest
• Fear of MidEast like problems compound the
  regions image as unstable

49
Pipeline Security

• The present and future pipelines will cross many
  borders
• The issue is who will protect the pipelines and
  who will pay for the security

50
Legal Issues

• The Status of the Caspian Sea Is it a Lake or a
  Sea
• If it is a sea then the three mile limit of the
  territorial waters applies

• Boundary disputes are an issue between many of
  the countries in the region

51
Legal Issues - What can be done?

• Regional discussions and treaties are the best
  means of solving the boundary disputes
• Contracts between oil companies and the countries
  need to address issues of infrastructure,
  pipeline security and pipeline transportation

52
Legal Issues What Can be Done?

• The United States needs to eliminate the barriers
  it has imposed on U.S. oil companies in order to
  prevent investment in Iranian oil.
• This would involve Congress as well as the
  President.

53
Summary

• The Caspian Sea is filled with possibilities but
  two big problems stand in its way to becoming the
  savior to US dependence on Mideast oil
• Pipelines need to be built
• Politics affect everything in the region and at
  this time hampers a productive solution to the
  pipeline problem

54
Summary, ctd.

• The U.S. and China seem to the key outside
  players in that they have the money to invest in
  pipelines and the desire to have the oil
• If the oil flows West then Chinas dependence
  which is far greater than the U.S.s, on the
  Mideast would remain the same
• If the oil flows East then there would be more
  oil for the U.S. but the dependence on that
  region has at the least remained the same and at
  the worst grown