Ex-Soviet na­tions, Iran agree on Caspian sta­tus

Gulf Times - - EUROPE -

Iran and four ex-Soviet na­tions, in­clud­ing Rus­sia, agreed in prin­ci­ple yes­ter­day how to di­vide up the po­ten­tially huge oil and gas re­sources of the Caspian Sea, paving way for more en­ergy ex­plo­ration and pipe­line projects.

How­ever, the de­lim­i­ta­tion of the seabed – which has caused most dis­putes – will re­quire ad­di­tional agree­ments be­tween lit­toral na­tions, Ira­nian Pres­i­dent Has­san Rouhani said.

For al­most three decades, the five lit­toral states – Rus­sia, Iran, Kaza­khstan, Turk­menistan, and Azer­bai­jan – have ar­gued over how to di­vide the world’s big­gest en­closed body of wa­ter.

And while some coun­tries have pressed ahead with large off­shore projects such as the Kasha­gan oil field off Kaza­khstan’s coast, dis­agree­ment over the sea’s le­gal sta­tus has pre­vented some other ideas from be­ing im­ple­mented.

One of those is a pipe­line across the Caspian which could ship nat­u­ral gas from Turk­menistan to Azer­bai­jan and then fur­ther to Europe, al­low­ing it to com­pete with Rus­sia in the Western mar­kets.

Some lit­toral states have also dis­puted the own­er­ship of sev­eral oil and gas fields, which de­layed their de­vel­op­ment.

“We have es­tab­lished 15-milewide ter­ri­to­rial wa­ters whose bor­ders be­come state bor­ders,” Kaza­khstan Pres­i­dent Nur­sul­tan Nazarbayev told a brief­ing af­ter sign­ing the Caspian con­ven­tion, adding: “Ad­ja­cent to the ter­ri­to­rial wa­ters are 10 miles of fish­ing wa­ter where each state has ex­clu­sive fish­ing rights.”

Nazarbayev also said the con­ven­tion ex­plic­itly barred any armed pres­ence on the Caspian Sea other than that of the lit­toral states.

The dis­pute be­gan with the fall of the Soviet Union which had had a clearly de­fined Caspian bor­der with Iran.

In ne­go­ti­a­tions with post-Soviet na­tions, Tehran has in­sisted on ei­ther split­ting the sea into five equal parts or jointly de­vel­op­ing all of its re­sources.

None of its neighbours have agreed to those pro­pos­als and three of them – Rus­sia, Kaza­khstan, and Azer­bai­jan – ef­fec­tively split the north­ern Caspian be­tween each other us­ing me­dian lines.

Azer­bai­jan, how­ever, has yet to agree on how to di­vide sev­eral oil and gas fields with Iran and Turk­menistan, in­clud­ing the Ka­paz/Ser­dar field which has re­serves of some 620mn bar­rels of oil.

The three coun­tries have tried to de­velop the dis­puted fields while at times us­ing war­ships to scare off con­trac­tors hired by other sides.

As a re­sult, none of the dis­puted projects has made much progress.

Speak­ing af­ter the sign­ing yes­ter­day, all five lead­ers praised it as a his­toric event, but pro­vided lit­tle de­tail about pro­vi­sions on split­ting the seabed.

How­ever, mak­ing it clear that the doc­u­ment is no fi­nal so­lu­tion, Rouhani said bor­der de­lim­i­ta­tion would re­quire fur­ther work and sep­a­rate agree­ments, although the con­ven­tion would serve as a ba­sis for that.

Moscow has no out­stand­ing ter­ri­to­rial dis­putes but has ob­jected, cit­ing en­vi­ron­men­tal con­cerns, to the con­struc­tion of a nat­u­ral gas pipe­line be­tween Turk­menistan and Azer­bai­jan which would al­low Turk­men gas to by­pass Rus­sia on its way to Europe.

It re­mained un­clear whether the con­ven­tion adopted yes­ter­day would def­i­nitely clear a way for the pipe­line.

Kazakh Pres­i­dent Nur­sul­tan Nazarbayev said that the doc­u­ment al­lowed pipe­lines to be laid as long as cer­tain en­vi­ron­men­tal stan­dards were met.

Ashley Sher­man, prin­ci­pal Caspian an­a­lyst at en­ergy con­sul­tancy Wood Macken­zie, said that although the sign­ing it­self was “an un­prece­dented milestone” for the re­gion, the im­me­di­ate im­pli­ca­tions for the en­ergy sec­tor would be lim­ited.

“We con­sider a Trans-Caspian Gas Pipe­line (TCGP) un­likely, even in the longer term”, he said in an e-mail. “Clar­ity on the le­gal sta­tus will shine more light on the com­mer­cial and strate­gic ob­sta­cles to a TCGP, from in­fra­struc­ture con­straints to sup­ply com­pe­ti­tion, not least from Azer­bai­jan it­self.”

In the up­stream sec­tor, the in­creas­ing in­tent for joint projects in the south Caspian is very promis­ing, Sher­man said.

“Stranded fields and frozen ex­plo­ration projects may well come back on the agenda,” he said.

How­ever, with off­shore Caspian oil and gas pro­duc­tion al­ready al­most at 2mn bar­rels of oil equiv­a­lent per day, the im­pact from new fields – if and when dis­putes about their own­er­ship are set­tled – might be lim­ited.

“The scale of the projects in dis­puted wa­ters is not com­pa­ra­ble to the ex­ist­ing su­per­giant fields, from Az­eri Chi­rag Guneshli and Shah Deniz in Azer­bai­jan to Kasha­gan in Kaza­khstan,” Sher­man said.

Azer­bai­jan’s Pres­i­dent Aliyev, Iran’s Pres­i­dent Rouhani, Kaza­khtan’s Pres­i­dent Nazarbayev, Rus­sia’s Pres­i­dent Putin, and Turk­menistan’s Pres­i­dent Berdy­mukhame­dov at­tend a baby stur­geons re­lease cer­e­mony at the 5th Caspian Sum­mit in Ak­tau.

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