Caspian Sea Status Remains Uncertain

Five years after meeting in Turkmenistan, the leaders of the five near-Caspian states—Azerbaijan, Kazakhstan, Russia, Turkmenistan and Iran—gathered during the second summit in Tehran to continue discussions on the legal status of Caspian Sea.

In the summit’s Final Declaration, the parties only mention unobjectionable positions on the future status of the Caspian Sea. The positions on which the heads of state disagreed are not included and become subjects for their future discussions. The countries are on record as stating that the Caspian Sea is a region exclusively under their jurisdiction and that they are committed to work for its prosperity and peace. “We spoke very frankly, in detail and in an interested fashion. We did not reach agreement all the time on everything, but it is very clear that we desire to find a consensual arrangement,” Russian President Vladimir Putin said at the joint press conference following the summit.

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Kazakhstan Threatens Tengiz; PSA Model in Jeopardy

by Inna Gaiduk, Caspian Investor


After shutting down operations at Kashagan, the largest offshore project, Kazakh officials have taken after the operator of the largest onshore development— TengizChevroil. However, the
authorities have decided not to limit their activities to Kashagan and Tengiz. Approval has taken place for a significant package of amendments to the law “About Subsoil and Subsoil Use.” Under these revisions, if the government regards an already concluded contract as potentially damaging to the “economic interests of the country,” it has the right to revise contract conditions and in some case to cancel it unilaterally. However, the changes may become more widespread. The Ministry of Economics and Budget Planning has recommended ending the use of production sharing agreements (PSAs) and utilizing contracts based on concessions.

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Companies to Design and Lay Nord Stream Pipeline

Nord Stream AG has chosen Snamprogetti (Italy) to perform the detailed engineering on the major gas pipeline between Russia and Europe. The Italian company won the assignment following an international tender. The contract includes developing a detailed pipeline execution and preparation plan, hydraulic and temperature analysis, analysis of pipeline length and stability, service platform and underwater cable crossing projects, as well as determining onshore pipeline connection locations.

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West Kamchatka Emerging as Next Major Offshore Project

Rosneft president Sergey Bogdanchikov contends that the development of the West Kamchatka shelf in the Sea of Okhotsk will be on the scale of the Sakhalin-1 and Sakhalin-2 projects, with the likelihood of surpassing both. Rosneft is developing the promising sites with the Korean National Oil Corp. (KNOC). Estimates put the potential resources of the entire West Kamchatka shelf at 3.8 billion tons of hydrocarbons. Recoverable reserves at the license sites could be 800 million tons. According to Bogdanchikov, development requires approximately $24 billion. Drilling of the first exploration wells will take place in 2008.



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Moscow Moves to Control Direction of Northern Oil Exports; Druzhba Pipeline Threatened

by Kent F. Moors, Ph.D.; Contributing Editor

Recently, a source within the Russian Ministry of Industry and Energy (MIE) confirmed that the government has approved plans to build a new export crude oil pipeline bypassing Belarus. The new line should parallel the current Baltic Pipeline System (BPS) and has the provisional working title of BPS-2. Initial estimates put the length of BPS-2 at 950 kilometers and the construction cost at about $2 billion. More importantly, it could carry a daily volume capacity of about 1 million barrels, enough virtually to eliminate the need for the current Druzhba export pipeline crossing Belarus.

Several sources have indicated for months that the route of the new pipeline is decided. Semyon Vainshtok, head of the Russian state-controlled crude oil pipeline monopoly Transneft, noted in July that the preliminary studies are virtually complete. The new pipeline will run from Unecha (in the Bryansk region, near the Russian-Belarusian border)) to Primorsk northwest of St. Petersburg on the Gulf of Finland. Primorsk already constitutes the seaport from which the greatest increase in Russian export volume moves. “Expansion is called for at Primorsk, given what the government has decided,” noted a Transneft contact. “There is no question this is intended to reduce reliance upon throughput countries for deliveries [of Russian crude] to Europe,” he added.

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