OIL TRADING AND EXPLORATION/RUSSIA

 

US Oil Refineries	Oil Specifications	Russia	Saudi Arabia	Nigeria	Shipping
European Refineries	Other Refineries	Libya	Kuwait	Iraq	China

When ever the subject of oil comes up in a conversation, most people have the tendency to think about the Middle East.  Saudi Arabia, Kuwait, Iraq....True, this area has historically been a major dominant producer of oil in the world market, today however there is a new hot spot, the Caspian Basin.

Located where Europe and Asia meet the Caspian Basin is comprised of the Caspian Sea and five countries surrounding it.  Russia, Kazakstan, Turkmenistan, Iran, and Azerbaijan.  Uzbekistan is sometimes included in this list, but lays to the east without any borders on the Caspian Sea.  These five countries together have an estimated proven oil reserve of 10-32 billion barrels and another 233 billion barrels of possible reserves.

Table: Caspian Sea Region Oil and Natural Gas Reserves ry

Proven* O

iSources: Oil and Gas Journal, Energy Information Administration

* proven reserves are defined as oil and natural gas deposits that are considered 90% probable
**  possible reserves are defined as oil and natural gas deposits that are considered 50% probable
*** only the regions near the Caspian are included

BBL = billion barrels, Tcf = trillion cubic feet
 

Due to this large amount of proven oil reserves and possible oil reserves, the Caspian Basin has drawn the attention of the international community of oil companies.  The U.S. is especially interested in exploration and investment as an alternative supply to the Middle East.  In an article in the Kazakstan Guardian on Dec. 4, 2002, Paul Brown called the exploration in the area the "wild east" due to the scramble by foreign investors trying to get a toe hold on oil exploration/production in the area.  A list of oil companies currently in the area includes four state or regional oil companies and 11 international oil companies with the list expected to grow.  

The following gives an overview of the history and present state of the oil industry for each nation state in the Caspian Basin as well as talk about the major players in the oil exploration/drilling.  

 Azerbaijan

Azerbaijan is located on the western side of the Caspian Sea, and lies between Russia to the north and Iran to the south, is one of the worlds oldest oil producing countries.  With an oil boom in the early 20th century this former Soviet Republic was producing 500,000 barrels per day during WWII.  Production declined until the early 1990's when several multinational companies went to Azerbaijan to tap into the 1.2 billion barrels of proven reserves and a huge amount of possible reserves.  

Currently, Azerbaijan gets 80% of its oil production from off shore drilling.  For 2002, Azerbaijan's production of oil has remained stable at 310,200 bbl/d.  To achieve this type of oil production, Azerbaijan has signed 21 field agreements with 33 companies from 15 countries, with British Petroleum being the largest.  In 1994 BP signed a 8 billion dollar, 30 year contract to develop 3 off shore fields which are expected to peak at 1 million bbl/d in 2010.

Kazakstan

 Kazakstan is the 5th largest country in the world land mass.  In 1991 Kazakhstan was producing over a half a million barrels of oil a day, making it the 2nd largest producer in the former Soviet Union behind Russia.  With 5.4 bbl of proven oil reserves and  another 92 bbl of possible reserves, Kazakstan has the largest amount of oil amongst the 5 countries in the Caspian Basin.  It opened its doors to foreign oil companies in 1992 after the collapse of the Soviet Union

Oil production has increased significantly in Kazakstan from 530,000 bbl/d in 1992 to 810,00 bbl/d in 2001.  To date in 2002 the production has averaged 892,000 bbl/d.  There is now slow down in sight and production is expected to reach 1.2 million barrels a day by 2005 and to 2.5 million barrels a day by 2015.

The majority of this production will come from three major fields: Tergiz, Karachaganak, and Kashagan.  The off shore field of Kashagan may hold up to 50 bbl of oil making it the 2nd largest oil field in the world.  In 1993 Cheveron Texaco made a 20 billion dollar agreement to develop the Tergiz Field.  Currently the field is producing a little over 250,000 bbl/d.

The Kashagan offshore field, discovered by Agip out of Italy in 2001, is the newest discovery and holds the greatest amount of oil potential.  This field is due to produce 100,00 bbl/d in its first stages of development.  "Kashagan", says Paul Brown (The Guardian), "in which British Gas and Shell have 16.6% states, is poised to bring an end to the dominance in oil supply held by OPEC and the Middle East."  ExxonMobil and TotalFinaElf are also big name oil companies working on the Kashagan field. 

Iran

Iran's economy relies heavily on oil exports.  The revenues it brings in are around 80% of the total export earnings, 40-50% of the Governments budget, and 10-20% of the GNP.  Iran holds 90 billion barrels , about 9% of the worlds total, of proven oil reserves.  Since 1995 there have numerous large discoveries of oil in Iran.  In 1999 Iran announced that it had made the largest discovery of oil in 30 years with a huge find in a giant off shore field called Azadegan.  The majority of Iran's oil comes from the south western region near the Iraqi border and the Persian Gulf.  Much of the land and oil fields was one factor in the heavy fighting during the Iran and Iraq war.

Iran does have its own Caspian Sea reserves, 15 billion barrels of oil and 11 trillion cubic feet of natural gas.  Almost none of this reserve has been found to be recoverable as of late.  In march of 2001 there was a 226-million dollar agreement with the Swedish company, GVA Consultants, and the Iranian company, Sadra, to build an oil rig in the Caspian Sea.  Iran's major role in the Caspian Sea is that it acts as a transit center for other countries oil and natural exports form the Caspian Sea area.  There is a limit on how much U.S. companies can invest in Iranian oil programs.  This  limit is set by the U.S. Iran-Libya Sanctions Act of 1996, the limit is 20 million dollars annually.
 

Russia

Energy account for 40% of Russia's exports and 13% of the GDP.  There are 48.6 billion barrels of proven oil reserves that lie in numerous fields throughout West Siberia, Timan-Pechora, East Siberia, the north Caspian Sea, and Sakhalin Island.  Russian oil companies say that there are many remote unexplored regions, and once explored they will dramatically raise the countries hydrocarbon supply.   The northern Caspian Sea region contains 10  billion barrels of proven oil reserves alone.  

Russia was once the worlds largest oil producer, at 12.5 million barrels a day in 1988.  After the break up of the Soviet Union, Russia's oil production began to fall.  Over the past few years the Russian oil has made a comeback due to large foreign investments, and in 2001 became the 2nd largest oil producing company in the world, producing 7.29bbl/d.

Turkmenistan

Turkmenistan's economy has been rebounding for the last few years following its split from the Soviet Republic.  Turkmenistan has 546 million barrels in proven oil reserves with possible reserves of up to 1.7 billion barrels.  Most of these reserves are found in the western part of the country and in large offshore areas in the Caspian Sea.  In 2001 Turkmenistan produced 159,000 barrels and consumed only 52,000 barrels.  Approximately 90% of this production was done by Turkmenneft, a state oil company.  In 2002 Turkmenistan is expected to reach 200,000 bbl/d.  Turkmenistan also has some of the world's largest deposits of natural gas, with proven natural gas reserves of approximately 101 trillion cubic feet (Tcf).