Caspian Oil
by Dr. Cyril Widdershoven

As various international energy forecasts predict an increase in energy demand for oil in the years to come, the Caspian region is and will become more and more prominent as one of the prolific regions in the world. The latest forecast of by OPECs World Energy Model suggests that world oil demand will reach 84 million barrels per day in 2005, 91 million barrels per day by 2010, 97 million barrels per day by 2015 and approximately 103 million barrels per day by 2020. As this forecast shows, OPEC members will have to come up with a crude oil and LNG production levels of about 36 million bpd in 2005, 41 million bpd in 2010, 47.8 million bpd in 2015 and 54.6 million bpd in 2020.

BP Chief Sir John Browne predicted that world oil demand will rise by 2 per cent a year for the next 10 years up to a peak of about 90 million bpd, a level he believes might be close to the industrys maximum production capacity. Furthermore, with developments in technology, allowing deep water drilling, that level of production might be maintained for 30 or 40 years before known oil reserves being to run dry. Sir John had this striking observation to offer: The amount of oil used in the next 10 years will exceed all the oil consumed in the first five decades of the last century. These remarks were substantiated by Ali Rodriguez, secretary general of OPEC, stating that according to OPEC consumption would grow by one third until 2020.

Sir John added that more efficient use of petroleum products and the supplement of alternative sources of energy might lead to some decline in Western oil consumption, but there would be a very substantial increase in the developing regions of Asia, particularly China. Technology is starting to provide some of the answers (put forward by environmentalists), with the development of both cleaner fuels and more efficient use of oil, but would not resist the legitimate aspirations of developing countries for growth and progress. As technology and politics will be the key factors driving the oil price, the deepwater technology is already in place while industry consolidation has created companies with sufficient capital and expertise to secure new supplies. However, this still means that new regions will have to be incorporated into the energy supply lines the next decades. The Caspian region is one of the foremost regions to be targeted for this.

Security of energy supply is in this case of the utmost importance and a very critical point to be assessed. The growing role of the Asia/Pacific region will play a major decision making role in the assessment of the Caspian region, with a vicinity to emerging consumer nations such as India, Pakistan, China and Japan. Based on an average consumption increase of 5% per year, Asian/Pacific demand for oil is expected reach 33.5 million bpd by 2010. China alone could be consuming 7.2 million bpd by 2010, and 10.7 million bpd by 2020, while oil production in Asia/Pacific region may decline from its current level of 6.3 million bpd. It is apparent that the Middle East will not be able to meet Asian/Pacific demand by then. The resources of the Caspian will become more prominent in the total constellation.

The Caspian as already is known is directly linked to developments in and around Iran. Irans vast energy reserves and its proximity to the Caspian gives it an important advantage among other states in the region. Irans strategic location in southwest Asia places it astride oil export routes from the Caspian region to the Persian Gulf, Turkey and Asian markets. Abbas Maleki, chairman of the International Institute for Caspian Studies, Iran, has written an in-depth analysis the last weeks on the directions Iran is following related to these developments. However, all its deliberations and conclusions should be taken into the light of its base in Teheran. Political considerations and faction building in Iran will have its impact on the total report. In that light, still, it is worthwhile to take it into account.

He concludes that the prospect of a constructing a gas pipeline from Iran to Armenia has been discussed for many years. Cost of construction are projected to around $120-150 million. This is a minor investment, in the light of exports of around one billion cubic meters per year. The fact that it is still under consideration, delayed, means political considerations are playing its role. A second possibility is to relay the Baku-Tiblisi-Ceyhan pipeline from Baku to Ceyhan via Tabriz. The Tabriz refinery has capacity for delivering about 150,000 bpd and the reverse pipeline should send up to 200,000 bpd to the Teheran refinery. This would mean that a pipeline with dual capacity from Baku to Tabriz and then to Ceyhan would be designed. This route to Mediterranean terminals is cheaper because of the closer distance and the dual capacity of the pipeline.

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