The Caspian Sea is going through rapid and sometimes painful growth as nations attempt to balance costs with ambitious plans.

The Caspian Sea region, including the marine area and the littoral states around it, holds large reserves of oil and natural gas. These reserves are still in the early stages of development, a situation that makes the region an important arena for players in the world energy markets.

Azerbaijan, Kazakhstan and Turkmenistan gained independence in 1991, and since then, each country has focused a great deal of time and energy on the development of its national oil and natural gas industries. Attempts by the Soviet Union to exploit the energy resources in these republics were thwarted by deteriorating infrastructure, lack of investment and outdated technology. This combination of problems accounts for the falling production in each of these countries at the time of the Soviet Union's collapse.
However, over the intervening years regional production has risen steadily. Azerbaijan, Kazakhstan and Turkmenistan all have attracted large amounts of foreign investment, and this money is beginning to transform their oil and natural gas production. The investment, the application of modern technology and the development of new export outlets provide all of the necessary elements for strong growth in oil and natural gas production across the Caspian region.

New solutions

The introduction of modern exploration methods underpins the resurgence in hydrocarbon production from the Caspian region. The success of recent marine geophysical surveys illustrates the value of adopting the latest seismic technology.

Caspian Geophysical, a joint venture between WesternGeco and the State Oil Company of Azerbaijan Republic, conducted three marine seismic surveys in the South Caspian basin. A time-lapse (4-D) survey was conducted for reservoir monitoring and two ocean-bottom multicomponent (4-C) 3-D surveys were designed to improve subsurface imaging. It was the first use of ocean-bottom cable equipment designed for large-scale 4-C seismic surveys within the Caspian region.

Ocean-bottom multicomponent acquisition allows both conventional P-wave and mode-converted shear-wave (S-wave) energy to be recorded on the seabed to improve the imaging and the characterization of the subsurface in poorly defined areas such as the mud volcanoes that are prevalent in the South Caspian basin.

International investment

The application of appropriate technology is not the only issue facing Caspian operators. The region clearly has huge energy potential, but this mineral wealth has been the focus of ownership disagreements in the area.

Despite the absence of agreements on the Caspian and its resources, several countries are engaged in active exploration and development programs in the areas that are generally considered to be their respective sectors. Azerbaijan, Kazakhstan and Turkmenistan have all made substantial progress in developing their offshore oil reserves.

Azerbaijan has signed many production-sharing agreements both on- and offshore, with the aim of developing its oil and natural gas industries. A large proportion of Azerbaijan's oil production has come from the shallowwater section of the Gunashli field, located 60 miles off the Azeri coast. After 1991, oil production in Azerbaijan fell to a low of just 180,000 b/d in 1997, but international investment helped raise production to 311,200 b/d in 2001.

Kazakhstan also invited foreign companies to assist in the development of its resources. International oil projects currently under way in Kazakhstan include joint ventures, production-sharing agreements and exploration/field concessions. After Russia, Kazakhstan was the largest oil-producing republic in the Soviet Union, but after its independence, Kazakhstan's oil production dropped by more than 20%, reaching a low of just 414,000 b/d, in 1995. Foreign investment in the oil sector has helped boost the country's oil industry since then, with production figures around 800,000 b/d being recorded in 2001. Most of this oil was produced from just three large onshore fields: Tengiz, Uzen and Karachaganak. Preliminary drilling in the Caspian Sea offshore Kazakhstan has revealed significant oil accumulations, especially in the Kashagan field. These discoveries have led some industry insiders to speculate that Kazakhstan may yet become one of the world's leading oil producers.

Turkmenistan has almost 550 million bbl in proven oil reserves, with possible reserves of up to 1.7 billion bbl. The bulk of these possible reserves are located in the western part of the country and offshore in the Caspian Sea. Current exploration efforts in Turkmenistan are focused on developing the offshore area, and a 10-year government program aims to raise oil production to around 1 million b/d by 2010.
Overall, oil production in the Caspian region amounted to approximately 1.3 million b/d in 2001. Production in the region is projected to increase dramatically over the next decade. Major development projects currently under way could boost production in the region to around 3.7 million b/d by 2010.
Unfortunately, the Caspian region's relative isolation from world markets and the limited number of export routes continue to hinder oil movement. Of the 920,000 b/d exported from the region in 2001, only about 400,000 were sent to consumers outside of the Caspian region states.

Some predictions suggest that production capacity from the Caspian basin could exceed 6.5 million b/d by 2020. This level of production would make the Caspian Sea comparable to the North Sea in terms of hydrocarbon production.

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