Caspian Sea Rich in Hydrocarbon Resources

Countries rich in hydrocarbon resources are said to have the upper hand in gaining growth.
As such, contracts on oil, gas and derivatives are shaping strategic partnerships between countries. It is therefore natural that even the possibility of the existence of oil resources in a region should draw large amounts of cash and facilities for exploring the potentials.
Since the breakup of the Soviet Union, much of the world’s interest has shifted to the huge oil and gas reserves (on and off shore) in the Caspian Sea region. However, proposed pipelines for the Caspian Sea oil and gas have been hindered by political instabilities in the region.
Lack of consensus among littoral states on a legal regime is further undermining the prospects for exploiting the sea’s resources.
Iran maintains it will pursue its right to achieve a fair share of the Caspian Sea wealth. Tehran has made it known that it favors a fair division of the sea’s resources for geographical and historical reasons, asking for at least a 20 percent share of the total reserves.
Based on preliminary estimates, the Caspian Sea sits on some 32.8 billion barrels of oil, shared by the Republic of Azerbaijan, Iran, Russia and Turkmenistan each possessing respectively 27, 7.5, 15 and 16 billion barrels, according to ISNA.
Estimates also suggest Iran would have to spend 10 dollars for production of each barrel of oil, requiring $70 billion in total investments. The country would earn $350 billion from selling the Caspian oil based on price of 50 dollar per barrel.

Focus of Debates
The Caspian Sea basin, particularly its energy reserves, continues to be the focus of debates among the littoral countries. To a large extent, this debate is no longer regional but international, since the interests of major oil companies are now involved.
In the long run, exploration and exploitation of the sea’s gas and oil deposits may allow the Caspian region to join the world’s major energy-producing sectors with high levels of oil and gas, areas which now include the Persian Gulf, North Africa and Western Siberia.
In the meantime, the long-term goals of all Caspian basin nations are to develop the infrastructure and transport capabilities of the region in order to produce large amounts of oil and natural gas for sale on the world market. The potential participants of a long-term development project are Russia, Azerbaijan, Kazakhstan, Turkmenistan and Iran.
As for now, the five states of the Caspian Sea basin lack adequate resources to independently explore and exploit the reserves that lie within their territorial boundaries, and will continue to be in need of foreign investment for the foreseeable future.
Problems for exploiting the sea’s oil are further aggravated by the technological complexity of extracting the oil deposits. In many cases, oil lies low in the shelf and a number of the most productive oil-fields, such as the one in Tengiz, have highly sulphurous oil, while productive layers can only be found deep under water.

Sharing Blocs
The Alborz Bloc, said to retain 20 billion barrels of oil, occupies the southern part of the sea and is shared by Iran and Azerbaijan with a depth of 55 meters from the sea level.
Blocs number 29 and six are estimated to have three billion barrels over respectively 17-22 and 14 percents of the waters at depths of 750 to 800 meters.
Nour and Rouyan blocs have 2.55 billion barrels of oil on an area constituting 17 percent of the water space at the depth of 700 meters. The Ramsar bloc is estimated to hold 1.5 billion barrels of oil over 11 percent of the total water space at 600 meters below the water level and the number eight bloc has 1.4 billion barrels at a depth of 550 meters near Iran’s shoreline. Blocs number 7 and 18 (Roudsar) have 900 and 500 million barrels of oil at depths of 750 and 80 meters respectively.
Although a legal regime is yet to be devised, some of the littoral states have gone ahead to sign unilateral agreements with western oil companies for exploring and exploiting the sea’s resources.
Since 2004 until now, more than one billion barrels of oil has been derived from the sea with Iran’s share at zero. While Russia, Azerbaijan and Kazakhstan have signed bilateral agreements in this respect, Iran maintains such activities are illegal as long as a legal regime has not been established.
Azerbaijan, Kazakhstan and Turkmenistan have exploited 1.4 billion barrels of the sea oil in the past eight years. Only in 2004, Kazakhstan exploited 1.7 billion rials worth of oil from the sea which rose to 1.2 billion rials in 2005.
Also, in the first eight months of 2005, Azerbaijan derived daily average of 398,000 barrels of oil from the sea up from 310,000 barrels per day in 2004. Turkmenistan during 2005 exploited a
daily average of 195,000 barrels.

Oil Exports
A daily 1.3 million barrels of Caspian oil was exported to international markets during 2005, showing an increase of 250,000 barrels per day compared to 2004. It is predicted that oil production from the Caspian by 2015 would reach 4 million barrels per day while output by members of the Organization of Petroleum Exporting Countries (OPEC) will by the same year be 45 million barrels.
Western oil companies have been concentrating their capital, technology and diplomacy to reduce their reliance on the Middle East oil reserves while eastern markets especially China and Southeast are also eyeing Caspian’s resources.
Iran has in the past called for the joint exploitation of the Caspian Sea, terming it as the best option to settle the issue of sharing its resources.
Iran has called for a condominium or common sovereignty of the sea and has made it known that it considers any unilateral deals for energy exploration in the Caspian Sea as null and void before the issue of the legal regime is settled.
Iran believes the agreements of 1921 and 1940 between Moscow and Tehran are still valid until a new Caspian Sea legal regime is drawn up.
Iran and Russia technically used to share the sea but since the former Soviet Union’s collapse and the birth of the three other republics, they have had to redraw the sea’s marine borders.
Iran has announced its intentions to develop oil fields in its own part of the Caspian Sea soon. It has welcomed foreign and domestic companies’ bids for participation in developing and prospecting the fields. The Oil Ministry has said drilling companies that win the bid will start working at Mehr and Anaran fields.
The government has announced up to $200 million will be allocated from the budget for research and prospecting in the Caspian every year.
Seismic studies have already started.
An oil official announced early last year that three-dimensional seismological operations at Iranian blocs in the Caspian Sea in preparation for spudding two wells were underway and drilling operations are to begin soon.
Asadollah Salehiforouz said after drilling test wells, exploration wells will be spudded at a depth of 800 meters below sea level and will continue up to 6,000 meters below the seabed. Iran Alborz semi-floating platform will be used for drilling operations whose construction is almost complete.
The official stated that using the most modern technology, advanced equipment and expert manpower are other aspects of drilling and exploration operations at Caspian Sea.
“Drilling in deep waters will be the first of its kind in Iran and drilling wells at a depth of more than 800 meters is technically very complicated the likes of which have not been done save for a number of areas in North Sea, Mexico, and Brazil.“
Any unilateral action by one of the interested parties will spread anxiety and distrust among the littoral states and damage the prospects for reaching a final agreement, further highlighting the importance of the five countries to sit at the negotiating table and make a deal.