Politics and Pipelines
Political problems, huge investments confront major oil discovery
This article was posted on August 27, 2000.
While the discovery of significant new oil fields in the Caspian Sea near Kazakhstan is good news for a petroleum-thirsty world, getting that oil to international markets will require overcoming enormous obstacles since it must travel by pipeline through one of the most politically volatile areas of the world.
In May 2000, oil industry officials reported sizable oil deposits in an area known as East Kashagan, in the Caspian Sea off the Kazakhstan coast. Initial estimates indicate the oil field could be huge, containing as much as 50 billion barrels, but more likely 20 billion barrels, of crude oil. But even the 20 billion estimate would make the Kashagan discovery enormous, and increase known crude oil reserves in the world by about two percent.
By comparison, the United States has known reserves of 21 billion barrels, while the North Sea field contains about 16 billion barrels.
The discovery also catapults impoverished nation of Kazakhstan, formerly part of the Soviet Union, onto the list of potential major oil producers. Previously, it was estimated that Kazakhstan had reserves of between five and seven billion barrels of crude oil.
The Pipeline Problem
Because the Caspian Sea is landlocked, oil and natural gas must be transported by pipeline to a terminal on the open sea, where it would be pumped into tankers and shipped to customers.
Such projects also face huge obstacles. Long distances over often inhospitable mountain and desert terrain, prone to earthquakes, and vulnerable to attack, would make pipeline construction and operation more difficult.
But politics, not nature, poses the greatest hurdle.
Analysts say that all five countries bordering the Caspian—Iran, Turkmenistan, Kazakhstan, Russia, and Azerbaijan—must be satisfied in order for an oil production deal to last.
A Troubled Region
Possible pipelines face problems in every direction.