Assessing the EIA’s Caspian Update
On 26 August the US Energy Information Administration released a rare update on the gas and oil developments of the Caspian Sea. Although it gives a good overview of the current reserves and production in the region, it leaves several gaps in discussing Iran’s activity - a critical factor for Caspian energy developments.
To be clear, the EIA report is not intended to be comprehensive, but it was still missing the point a little to revisit the old argument about whether the Caspian is a sea or a lake (p5), which would affect how the waters of the Caspian are divided. Although in principle the littoral states are still negotiating on what kind of legal regime governs the Caspian, nobody expects one to be agreed anytime soon, and in practice they are mainly seeking to codify the ‘facts on the water’ and use legal arguments to further their own aims.
For issues regarding the waters itself – shipping, navigation, protection of ecological resources – the littoral states have essentially accepted a condominium approach (although given the ecological damage inflicted on the Caspian, this condominium is more one of omission). One exception is on the issue of a subsea gas pipeline from Turkmenistan to Azerbaijan, which Russia and Iran claim could affect the environment and must therefore be approved by all littoral states. This is a political argument, not a legal debate.
On subsoil oil and gas resources, the consensus is firmly on the side of dividing the Caspian based on modified median lines. The maritime borders between Russia, Kazakhstan and Azerbaijan have been broadly settled; those between Azerbaijan, Turkmenistan and Iran are still in dispute. But only Iran insists on anything other than a modified median line, claiming that each national sector should comprise 20% of the Caspian, regardless of shoreline length (the latter formula gives it only 12-14%). The point is that debates over the precise legal status and regime are purely instrumentalised for political and economic goals, a fact which the EIA does briefly acknowledge.
The report suggests that the Caspian basins, including onshore sections contain 48 billion barrels of oil and 292 trillion cubic feet of gas (proved and probable). Of that, 41% of oil and 36% of gas is believed to lie offshore. It is welcome to get some solid estimates for the Caspian’s reserves: figures for both oil and gas are notoriously elusive, particularly for the sea and surrounding basins rather than for the total reserves of the littoral states. Interestingly, the report also cites figures from the US Geological Survey (p10) which suggests that the Caspian basins could contain up to 20bbls of oil and 243tcf of undiscovered gas.
The EIA figures help to put the Caspian’s reserves into context. Although nobody talks about the region as being a ‘new Middle East’ anymore, its reserves are still sometimes given an undue significance.
Of particular interest is the assessment that up to 81% of undiscovered gas may lie in the South Caspian Basin, “reflecting the more limited exploration and geologic assessment of the southeastern part of the Caspian Sea near Iran and Turkmenistan because of territorial disputes”. Indeed, the southeastern sector of the Caspian is a largely untapped gas frontier, although between Turkmenistan’s foot-dragging over handing out offshore contracts and Iran’s international isolation, it won’t be fully explored anytime soon.
The report also touches on Iran’s Caspian oil and gas reserves, a subject which is mostly shrouded in mystery. It suggests that Iran holds just 0.5bbls of oil and 1tcf of gas offshore, with zero production in 2012. Although the oil figure tallies with Iranian statements, the gas figure is in marked contrast to Iranian claims that its Sardar Jangal field holds 50tcf of gas, “more than ten times Shah Deniz” just over in Azerbaijan’s waters.
Sardar Jangal is, as previously reported, somewhat mysterious and few believe the gas figure is accurate. Iran claimed its discovery in December 2011 but news and activity then has been sparse. Even the location is a puzzle – a rough triangulation based on initial information put the field in the disputed border region with Azerbaijan, not far from the Alov field which has provoked military stand-offs between the neighbours in the past; however the EIA report (p2) puts the field far to the south of this. Meanwhile the rig supposedly drilling at the field is significantly to the east and reportedly has not moved in a year.
However, the report does not address the serious questions about the field’s ownership, despite the fact they clearly demonstrate the problems surrounding maritime borders which continue to limit gas exploration in the southern part of the sea. The hard facts of political and economic ambition, rather than legal wrangling, will continue driving gas and oil exploration in the Caspian.
Alex Jackson is an analyst of political, energy and security issues in the Caspian region. He is based in London and can be contacted at ajackson320@gmail.com.