How Many Oil Pipelines Will be Needed? Prior to 1997, exporters of Caspian oil had only one major pipeline option available to them, the 210,000 bbl/d Atyrau-Samara pipeline from Kazakhstan to Russia.
In addition, smaller amounts of oil were shipped by rail and barge through Russia, as well as by a route to be developed were the two early oil pipelines built to carry initial volumes of AIOC oil to world markets.
AIOC Exports began in late 1997 along a northern route from Baku to Novorosiisk, and exports increased with the completion of the western route for early oil from Baku to the Georgian Black Sea port of Supsa in April 1999. These two routes had a combined initial design capacity of about 235,000 bbl/d.
Disputes and instability in the Chechnya region along the Northern Route led to the completion of a Chechen bypass in 2000. The completion of this bypass (including a rail bypass) and a link to the Russian Caspian Sea port of Mahachkala raised total capacity of these alternative pipeline routes to 375,000 bbl/d.
In addition, a new pipeline is being built to meet the projected peak volumes from the Tengiz field and other Kazakh projects. The Caspian Pipeline Consortium (CPC) is constructing a 1.34 million-bbl/d oil export pipeline that will bring Tengiz oil to the Russian Black Sea port of Novorosiisk.
CPC members include Russia (24%), Kazakhstan (19 percent ), Chevron (15 percent ), LukArco (12.5 percent, Russia/United States), Mobil (7.5 percent), Rosneft-Shell (7.5 percent, Russia-U.K./Netherlands), Oman (7 percent ), BG (2 percent , U.K.), Agip (2 percent, Italy), Kazakhstan Pipeline Ventures (1.75 percent, Kazakhstan), and Oryx (1.75 percent, United States). Phase I of the CPC pipeline will be completed in June 2001 with a capacity of 564,000 bbl/d.
In addition, the Tengizchevroil joint venture has been developing additional routes for getting Tengiz oil to world markets, including shipping oil by barge across the Caspian to ports in Azerbaijan for further trans-shipment westward by rail and pipeline to the Black Sea.
Tengizchevroil plans to ship oil to the port of Dubendi in Azerbaijan, and will use rail and a renovated Khasuri-Batumi oil pipeline (separate from the AIOC pipelines) to transport another 70,000 bbl/d of oil westward to Georgian ports. In addition, small amounts of oil are being exported from Kazakhstan via rail through Russia and to China.
By the end of 2001, the new export routes will have increased total export capacity from the Caspian Sea region to 1.3 million bbl/d. These pipelines are insufficient to carry the large oil flows expected from the AIOC and other projects. A 1 million bbl/d pipeline has been proposed for a Main Export Pipeline (MEP) to transports oil from the AIOC and other Caspian Sea oil projects.
On October 29, 1998, support for the Baku-Ceyhan route for the MEP was affirmed with the signing of the Ankara Declaration by the governments of Azerbaijan, Georgia, Kazakhstan, Turkey, and Uzbekistan, with Turkemenistan abstaining.
The Istanbul Declaration, signed by Azerbaijan, Georgia, Turkey, Turkmenistan, and the United States on November 18, 1999, reaffirmed the route by making a formal agreement between the governments of Azerbaijan, Georgia, and Turkey for the construction of the pipeline along this route, and all three governments have ratified this agreement. In May 2000, representatives of these countries met with potential investors to pave the way for the creation of a Main Export Pipeline Company, or MEPCO.
For this pipeline to move forward, significant flows will be needed to justify the expense. Azerbaijan could supply about half of the oil required, but the other half will need to come from sources other than Azerbaijan.
Nurlan Balgimbayev, president of Kazakhoil, has stated that the Baku-Tbilisi-Ceyhan pipeline will not exist without Kazakh oil. Kazakhstan has indicated that it could supply 400,000 bbl/d through this line, although with the completion of the CPC line and the expansion of the Atyrau-Samara pipeline to Russia, Kazakhstan will have limited amounts to export via this pipeline in the near future, until additional Kazakh production from the OKIOC or other projects comes online.
Differences in crude oil quality between Kazakh oil and oil from the AIOC project will also need to be accounted for Alternatives to building the MEP include expanding the early oil pipelines until oil flows from Azerbaijan become significantly larger.
Completion of the MEP pipeline and further planned expansion of the other pipelines would add slightly more than 2 million bbl/d of capacity, which will be sufficient to meet 2010 projected exports from the Caspian region of 3 million bbl/d. However, Iran has been promoting oil swaps via its proposed 370,000 bbl/d pipeline from its Caspian Sea port of Neka, and if all of these options are developed excess export capacity could develop within the decade. If export levels increase to over 5 million bbl/d by 2020 as projected, new export routes and line expansions will need to be developed, with possibilities including the construction of 1-2 new export pipelines or fewer pipelines and further expansion of existing options.
How Much Natural Gas Could be Exported from the Caspian Region? Natural gas production in the Caspian Sea region is projected to reach 4.3 Tcf in 2000, of which 1.3 Tcf will be exported, mostly from Turkmenistan.
Projects currently underway could help boost Caspian Sea region production to over 8 Tcf by 2010, and could increase natural gas exports to over 4 Tcf - mostly from Turkmenistan. By 2020, Caspian Sea region natural gas exports could increase by another 2-3 Tcf.
Unlike with oil, the Caspian's gas resources were extensively developed under the Soviet Union, and Caspian region production in 1990 was 5.4 Tcf. The collapse of the Soviet Union led to downturns in both production and exports.
The new republics that had been customers for Caspian gas have been unable to pay for these supplies, reducing the markets for Caspian gas. In addition, exports had been limited because virtually all current export pipelines pass through Russia and require agreements with Gazprom, the Russian gas company which owns the pipelines and which has been a competitor with Caspian gas in the past.
However, recent changes in policy have resulted in new agreements between Gazprom and countries such as Turkmenistan to further use Russian pipelines and to increase natural gas sales to Gazprom.
How Many Natural Gas Pipelines Will be Needed?
Exporters of gas currently in the Caspian Sea region have two options available to them. Exporting through the Russian gas pipeline system was the only option available for Caspian gas until 1997.
Although over 2 Tcf of Caspian Sea Region gas had been exported via this system in 1990, exports fell to 0.3 Tcf in 1997 because of disputes between Turkmenistan and the Russian gas company Gazprom, a competitor with Turkmenistan, which owned the pipelines.
This dispute has been settled, and exports are expected to be 1 Tcf higher in 2000. Turkmenistan and Gazprom have agreed to increase shipments of Turkmen gas via Russia to 1.8 - 2.1 Tcf per year by 2005-2006, with total capacity on this line as much as 3.5 Tcf per year.
Turkmenistan developed the region's only alternative export route by building a new pipeline from Ekarem (Turkmenistan) to the Iranian border. Limited exports began in 1997, with a current capacity along this route of 350 billion cubic feet (bcf) per year, and proposals have been made to increase capacity to over 1 Tcf.
Neither of these pipelines will allow Caspian Sea Region natural gas to compete for a share of the Turkish gas market unless Gazprom re-exports the Turkmen gas to Turkey. Demand for natural gas in Turkey is projected to quintuple within 10 years to almost two Tcf. In addition, there are no export options available to supply gas to the Asian market, where energy demand is expected to grow more rapidly than in any other part of the world.
For natural gas exports to reach these new markets, and for exports to realize their annual potential of over 4 Tcf by 2010 and 7 Tcf within 20 years, several new pipelines will need to be built.
Most of the proposals call for pipelines with a capacity of 0.5 - 1 Tcf each, so that 1-2 pipelines could be built by 2010 and three or more pipelines could be built by 2020, depending upon the extent to which the existing Russian system will be used to supply gas to Turkish and European markets.
Of the proposed new pipelines, the ones that are in the most advanced planning stages are the ones to bring gas to Turkey, such as the 1 Tcf capacity Trans-Caspian pipeline and the 0.5 Tcf capacity Baku-Tbilisi-Erzurum pipeline.
Source : United States Energy Information Administration.
Please Note: Information contained in this report is the best available as of June - August 2000 and can change.
© 2000 Mena Report (www.menareport.com)
