Thursday, November 4, 2010

Future of Caspian Energy

The International Energy Agency (IEA) is preparing to publish a report touting the Caspian region as ready for a sizeable increase in production and export of energy, according to the Financial Times (November 2, 2010). The FT has seen an advance copy of the annual World Energy Outlook, which forecasts oil production will peak at about 5.4 million barrels per day between 2025 and 2030, almost double current production. The main driver will be Kazakhstan's Kashagan and Tengiz fields. As for natural gas, the IEA says that Turkmenistan will become one of the 10 largest gas producers in the world.

The IEA warns there are a number of barriers to the countries' achieving these lofty goals. For example, getting the oil to market needs a pipeline network that will require massive investments. As for gas, the IEA warns that Russia could stifle development of Caspian exports, because such a flow to international markets would be direct competition to their own natural gas industry.

The International Monetary Fund, in their April 2010 World Economic Outlook, also discuss economic growth in the CIS region. They say that the current economic recovery is underpinned by higher commodity prices in oil, gas and metals. The IMF predicts that higher volume of investments and gas exports will mean a projected 12% growth rate this year. The IMF warns, however, that Kazakhstan faces problems in its banking sector that calls for an independent assessment of its largest banks' balance sheets.

In the meantime, Azerbaijan continues to expand its energy export business. The US Army War College's top analyst on CIS countries, Stephen Blank, writes that in the past three months alone, Azerbaijan has agreed to ship a small amount of Turkmen oil via the Baku to Ceyhan pipeline; is increasing its exports of natural gas to Russia, and is estblishing AGRI (Azerbaijan-Georgia-Romania Interconnector) as a route in addition to Nabucco to get its gas to market. (

Free and unfettered access to Caspian oil supplies is clearly in the interest of the United States and the entire Western World. As the IEA will point out in its study, the area has the ability to "meet almost all the projected import requirements of North America in 2035."

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at