Caspian Sea Agreement Will Boost Oil Production

Caspian Sea Agreement Will Boost Oil Production

Baku, Caspian SeaAfter more than two decades of differences, an agreement has been reached over the Caspian Sea. It is paving the way for new oil and gas extraction and pipelines.

This agreement ends the dispute over whether the Caspian is a sea or a lake, yielding a special legal status and clarifying the maritime boundaries of each surrounding country. Each of the surrounding country can lay pipeline offshore with the consensus only from the neighboring states affected, rather than from all Caspian Sea nations.

“Many years of thorough work have culminated today in the signing of the Convention on the Legal Status of the Caspian Sea,” Kazakhstan President Nursultan Nazarbayev said Sunday in the coastal city of Aktau, as broadcast by Rossiya 24 television. The five states also signed agreements on trade and economic ties, transportation and fighting terrorism.

Since the collapse of the Soviet Union, Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan have tried to define the Caspian Sea’s legal status in order to divide up the waters and its natural resources for new drilling and pipelines. While territorial disputes were unfolding, the U.S Energy Information Administration estimated in 2013, the conflict has prevented the exploitation of 22 Bbbl of oil and more than 240 Tcf of gas.

While the treaty “will take us one step forward,” there remain “important issues” to be resolved, Iranian President Hassan Rouhani said Sunday before the summit, as reported by the IRNA news agency. One issue needs to be address is the distribution of rights to seabed oil and gas deposits.

The new agreement states that the development of seabed reserves will be regulated by separate deals between Caspian nations, in line with international law. This essentially cements the current situation, since countries such as Kazakhstan and Russia already have bilateral accords on joint projects.

Offshore oil and gas reserved have already been developed by the five Caspian Sea nations. They are located near the coast. Projects in the northernmost waters Kazakhstan’s giant Kashagan field and Russia’s Filanovsky and Korchagin deposits – are a potential source of future oil-output growth for the countries

The treaty will also remove a legal barrier to building a trans-Caspian gas pipeline from Turkmenistan to Europe, the Oxford Institute for Energy Studies said in July, adding that “political and strategic obstacles would remain.” While the European Union and Azerbaijan have supported the long-planned pipeline project, which could ease Russia’s grip on the EU’s gas market, the Kremlin has opposed it, citing environmental concerns and legalities.