Caspian producers seek independence.

Author:Land, Thomas
Position::BUSINESS & FINANCE
 
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A series of giant hydrocarbon export projects has created an opportunity for two newly independent republics of former Soviet Central Asia to loosen the economic ties that still bind them to the Kremlin. These Middle East plans in the pipeline will redraw the energy map of the Caspian region for the 21st century and relieve acute shipping congestion and security problems in the treacherous waters of the Turkish straits.

OIL-RICH KAZAKHSTAN AND gas-rich Turkmenistan have agreed to build an export pipeline to Russia. The scheme promises huge profit opportunities for Moscow--but it may ease the logistical grip in which it holds its former colonial possessions.

The Caspian holds proven reserves of some 35bn barrels of oil. Its natural gas reserves are even larger. Their exploitation depends of the construction of a reliable long-range transport infrastructure, turning the Caspian into a major exporting area for a hydrocarbon-deficient world but progress is bedevilled by geography and geopolitics.

Russia has just won the first round of a global race for control over massive natural gas resources in a Turkmen section of the Caspian basin. Vladimir Putin, the jubilant Russian president, has clinched a landmark agreement with Turkmenistan as well as Kazakhstan for the construction of a northward pipeline for the transport of 20bcm (billion cubic metres) of gas a year within five years, destined for re-export to western Europe at a huge profit.

The deal was announced following two days of negotiations at a summit conference in the Turkmen port city of Turkmenbashi in May. Presidents Gurbanguly Berdymukhammedov of Turkmenistan and Nursultan Nazarbayev of Kazakhstan, the other conference participants, agreed to sign a formal treaty by September. Other countries will be barred from participating in the project on which construction is scheduled for next year.

The scheme holds out hope for Turkmenistan and Kazakhstan to moderate their dependence on Russia, their former colonial master in the defunct Soviet Union, for hydrocarbon export routes to world markets.

Industry specialists believe the pipeline, intended to pump Turkmen gas via Kazakhstan to Russia, may cost well over $1bn. An announcement posted by the Kremlin says it will carry at least 20bcm of gas a year by 2012. This volume is likely to be increased eventually to 30bcm, according to Viktor Khristenko, the Russian energy minister.

In addition, plans call for the doubling of the capacity of an...

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