The Oil Drum: Europe

Topics include:

Economy – UK and Europe; Geopolitics - Caspian; Coal / China / Kyoto Protocol; Natural Gas - Iran; Russia - Wheat Exports; ASPO-USA P.O. Conf. – Media Response; Economy - USA

Oil & gas in the Caspian has a long history - indeed it is one of the earliest oil production regions in the world, with Baku a major oil center in the second half of the 19th century and beyond. What makes the situation today interesting is the simultaneuous appearence of three things: (i) new reserves discovered offshore, (ii) the fact that, with the break up of the Soviet Union, the oil is located in (new) countries that are keen to have foreign investment and are now one of the few oil provinces around the world that still welcome Western oil majors, and (iii) these countries have no direct access to the world markets.

Graph by JaP. "kb/j" = thousand barrels per day. "Autres" = other

Grin, officially I am hiding out for a couple of weeks on vacation, so my input is not going to be that profound, but I did read the Asian Times article that Reed posted, and I think it is worth taking the time to look at it in a little detail. It deals with the Chinese installation of pipelines and their connection out to the Caspian Sea.

I was particularly struck by the paragraphs

This has major strategic implications for the future of the Washington-backed BTC oil pipeline. That pipeline was built by the Caspian Oil Consortium headed by British Petroleum, and was backed by both Clinton and George W Bush, despite the fact that it was the most costly and least viable oil route out of the Caspian.

Former US national security advisor Zbigniew Brzezinski had been the chief Washington lobbyist advocating the BTC route to circumvent Russia. Its construction was undertaken on the assumption that it would carry not only Baku oil, but also a major share of Kazakh oil from Tengiz and offshore Kashagan oil fields. Oops!

. Following recent Chinese activity a lot of that oil will be heading East not West. The production through the pipeline had been delayed, but this is obviously reason for even greater concern, something we have written about before.

And, apropos the views of experts, I am up in Maine, where we were told it was going to be an extra-cold winter, only to find that it is the other way around.  So now they tell me, just after I bought that heavy duty parka.

Just a short note for those who were expecting the supply from the Caspian to begin appearing through the BTC pipeline in Ceyhan about now. Argus has a story that the pipeline will not begin deliveries until May 2006, at the earliest.

The BTC pipeline is also being filled with "technical" crude - oil required to fill the line ahead of operational start-up - too slowly, according to observers. Between May, when technical crude deliveries started, and by 18 November the line had only received 4mn bl out of a total 10mn bl required, BP says. Oil has now entered the Turkish section of the pipeline, says a BP spokesman.

No impact on output
BP says the BTC delay will have no impact on offshore production by the AIOC consortium, which is developing Azerbaijan's Azeri-Chirag-Guneshli block in the Caspian Sea. The BP-led AIOC group has now increased production to 380,000 b/d in the expectation of being able to start exports through the BTC line.

For the time being, AIOC continues to use the Georgian ports of Supsa and Batumi on the Black Sea for exports of Azeri Light, with around 253,000 b/d of crude due to go through these two outlets this month. Remaining AIOC output is going into the BTC pipeline as line-fill.

The recently confirmed BTC delay is just the latest in a series of postponements. The first crude shipment from Ceyhan was originally supposed to have taken place in May last year. In the longer term, the BTC line is also set to handle Kazakh crude - primarily from the offshore Kashagan field, where production is supposed to start in 2008 - although Azerbaijan and Kazakhstan have yet to sign an inter-governmental agreement on the issue.