Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Caspian's Potential Could Rival Mideast

BAKU, Azerbaijan -- The hopeful words are heard everywhere: Rough-edged Baku is an oil boomtown just waiting to happen. It's hard at first to imagine.

Electricity often blinks off then surges at bulb-frying voltage. Bits of charmless Soviet-era apartments drop away during rain storms. Shantytowns teem with refugees from Chechnya and from Azerbaijan's territorial fights with Armenia.

But look to the horizon.

Out there, on the steel gray Caspian Sea, the dream seems plausible. A thicket of rigs and drills points toward the center of the giant inland sea and its untapped oil and gas riches. They could rival, even surpass, some of the richest sites outside the Middle East.

"The Caspian has blessed us with the potential for wealth," said Sabit Bagirov, a former president of Azerbaijan's state oil company. "Wealth can also attract troubles. Unfortunately, we live in a tricky region."

One that is not getting any easier.

The five Caspian nations -- Iran, Russia and three other former Soviet republics -- make OPEC disputes seem genteel. Deep divisions cut into every key issue around the Caspian: how to divvy up the resources, how to deal with deep-pockets of Western energy giants and where to lay the pipelines. And it doesn't stop with economics. The political compass is being tugged by three forces: the longtime Caspian masters in Moscow, newcomers from Washington and Europe and anti-American Iran.

The competition may only intensify. A possible war in Iraq and growing insecurity around the Middle East has given urgency to the development of new oil centers, mainly in Africa and the Americas. The Caspian -- long known more for caviar than the other "black gold" -- is suddenly moving high on the agenda of nearly every international fuel prospector.

At 366,000 square kilometers, the Caspian is the world's biggest inland sea and its second deepest. As former Soviet republics Azerbaijan and Kazakhstan align with the West, some see a replay of the "Great Game" -- the early twentieth century battle for influence in central Asia between the Russian and British empires. Others see flaws in the analogy. The Caspian, they say, is just the latest stage for the timeless interplay of politics and profit.

"All politics is a great game. States will always try to expand their power and extend their influence," said Brenda Shaffer, research director of the Caspian Studies Program at Harvard University. "Every area is up for grabs if there is something to be grabbed. In that sense, the Caspian is perhaps a greater game than most."

Even Marco Polo noticed its potential. The thirteenth century Venetian explorer described the strange, flammable ooze in the sands around Baku. In the late nineteenth century -- at the dawn of the oil age -- wildcat drillers hit gushers using just hammers and spikes. The Caspian had its first taste of petro-wealth.

The Soviet Union later swallowed most of the Caspian, leaving Iran with just its southern edge. But offshore exploration was limited in favor of plentiful supplies on land.

Everything changed with the Soviet disintegration. The new Caspian countries -- Azerbaijan, Kazakhstan and Turkmenistan -- offered Western oil companies a new frontier with possible vast rewards. Almost every big player has come calling.

In Azerbaijan, BP is leading an international consortium planning a $2.95 billion pipeline to a Turkish Mediterranean port, Ceyhan. The project, scheduled to be ready in early 2005, is a who's who of big oil: France's TotalFinaElf, Italy's ENI Agip and U.S. firms Unocal Corp. and Exxon Mobil Corp.

Across the Caspian in Kazakhstan, U.S. energy giants ChevronTexaco Corp. and Exxon Mobil have joined a host of major European partners.

This month, CNOOC, a Chinese offshore oil and gas producer, said it paid $615 million for an 8.33 percent interest in a Caspian Sea oil project in Kazakhstan's Caspian waters that contains one of the world's largest oil and gas discoveries of the last 30 years.

In Turkmenistan, on the other hand, Exxon Mobil shut down its operations last year after test drills at an onshore site yielded little oil, as have others at sea and on land around the Caspian. But surveys suggest Turkmenistan could eventually yield some of the Caspian's biggest offshore reserves.

So how much oil and gas is really out there? Proven oil reserves are just 10 billion barrels, or roughly equal to Norway's. But possible levels -- considered at least 50 percent probable -- could reach 243 billion barrels of high quality crude comparable to the benchmark North Sea Brent, according to U.S. government and private estimates. That's close to Saudi Arabia's ocean of oil.

Natural gas reserves could hit 13.1 trillion cubic meters, or about 25 percent of the entire Mideast reserves, industry reports say.

The big figures still fall short of the sky-high hopes of the mid-1990s. The Caspian, it seems, will be a major sideshow. The Mideast remains the main event.

"There was a lot of hype around that Baku would overnight become a new Kuwait," said David Woodward, president of BP's Azerbaijan operations. "Today we really don't believe the Caspian is going to be a new Middle East, but it's going to be a significant source of oil and gas for international markets on a scale comparable to a new North Sea or a new Gulf of Mexico."

Strategically, however, the Caspian is huge. The United States and other nations have sought to reduce dependence on Mideast oil since the 1973 Arab embargo. Terrorist fears have made new energy frontiers a priority.

The Caspian can keep the momentum going for decades, experts say.

"The Caspian is just part of the global diversification of oil sources," said Shaffer. "The days of using oil as a weapon are over."

Russia, by far the biggest Caspian power, appears content to allow heavy foreign investment as long as enough Caspian oil is directed to its Black Sea port of Novorossisk, where tankers head to Western markets.