Nazarbayef soft-pedals Iranian pipeline route

Sam Fletcher
OGJ Online

HOUSTON, Dec. 20 -- In a Houston speech late Wednesday, Kazakhstan President Nursultan Nazarbayef seemed to play down a proposed oil and natural gas pipeline route through Iran that he pushed for in talks earlier this month with US Sec. of State Colin L. Powell.

Responding to a question about the "most important pipeline routes" to carry oil and gas from the prolific Caspian Sea region to world markets, Nazarbayef said Iran is among a number of potential routes being considered. Other possibilities include routes through Russia and Poland to the Baltic Sea or eastward to western China, he said.

"Our priority for the near term has already been fulfilled for the next 7-10 years," Nazarbayef said in Russian through an interpreter. However, he later said additional pipeline capacity would be necessary when development of Kazakhstan's huge Kashagan oil discovery begins after 2005.

Late last month, US Energy Sec. Spencer Abraham attended the opening ceremony for the 900-mile pipeline that extends from the large Tengiz and other oil fields in western Kazakhstan to a new terminal on the Black Sea near Novorossiysk, Russia (OGJ Online, Nov. 27, 2001). The first oil through that pipeline reached the terminal in August and tanker shipments from Novorossiysk started in October. That pipeline is expected to reach its capacity of 600,000 b/d in the first half of next year.

It took almost a decade to complete that $2.65 billion project, although construction started only in 1999.

At a Dec. 9 meeting with Powell in Kazakhstan, Nazarbayev urged the US to consider the Iranian route as the most direct and cost-effective means of moving Caspian oil and gas into world markets.

"I say frankly that our investors who work on oil consider that the most beneficial route is through Iran to the Persian Gulf," he said at that time.

Although Powell didn't rule out an Iranian route, he reiterated the US view, first developed by President Bill Clinton, that routes through Russia and Turkey are preferred and would be sufficient to handle Caspian production.

Nazarbayef was less emphatic about the Iranian route in his talk Wednesday evening at the James A. Baker III Institute for Public Policy on the Rice University campus in Houston. The future route for an additional pipeline from the Caspian area to outside markets will be "decided by the (participating development) companies after their evaluation of costs of transportation," he said.

That speech to a small invited group was billed as the only public presentation scheduled for Nazarbayef during his current visit to the US at the invitation of President George W. Bush. The purpose of his visit, said Nazarbayef, is to "adopt an energy partnership" for development of Kazakhstan's rich oil and gas resources.

"We will do our best to attract investors," he said.

After meeting with oil company representatives in Kazakhstan earlier this month, Powell said, "They were talking (of investing) in the range of $200 billion over the next 5 to 10 years because they see that kind of potential."

The five countries in the Caspian area -- Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan -- are projected to have remaining petroleum liquids reserves of 39.4 billion bbl, said industry analysts (OGJ, Dec. 17, 2001, p. 18). Only their Caspian reserves are included in that number for Iran and Russia.

However, analysts said the discovery last year of Kashagan oil field, one of the world's biggest finds in recent times, has shifted the reserves balance clearly in favor of Kazakhstan. With that giant discovery, Kazakhstan now controls about 75% of the Caspian's petroleum liquids.

With estimated associated gas reserves of about 25 tcf, the Kashagan discovery also enhanced Kazakhstan's position as a regional gas player, bringing it in line with the vast remaining gas reserves held by Turkmenistan. Kazakhstan and Turkmenistan contribute 45% and 44%, respectively, of the Caspian's 207 tcf total remaining gas reserves.

When the Kashagan field is developed, Nazarbayef said, another pipeline would be needed to carry that oil to market.

Contact Sam Fletcher at samf@ogjonline.com

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