The issue of which country owns what part of the Caspian Sea is central to the petro-politics of the entire Caspian region (OGJ, July 21, 1997, p. 23).
A major diplomatic row was triggered this summer after the Russian oil companies Rosneft and Lukoil signed a pact with Azerbaijani's state oil company, Socar, for jointly developing Kyapaz field in the Caspian.
The July 4 pact gave Socar a 50% share in the nearly $1 billion project to develop the 350 million bbl field with Lukoil 30% and Rosneft 20%.
The five states with a Caspian coastline (Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran) have been at loggerheads for the past 3 years over whether that body of water should be legally defined as a sea or a lake.
The question arose in September 1994, when Azerbaijan signed a pact with western oil companies and Lukoil to exploit Chirag and Azeri fields and the deepwater section of Guneshli field.
Sea or lake?
Russia claimed that contract contravened an existing treaty between it and Iran on the joint use of Caspian's resources.Russia and Iran argue the Caspian is a lake and therefore, under international law, its resources may be exploited only on the basis of an agreement concluded by all littoral states.
Kazakhstan and Azerbaijan argue the Caspian is a sea and should be divided into national sectors that each country has the right to exploit as it pleases.
Turkmenistan initially subscribed to the Kazakh-Azerbaijani view but, in late 1996, accepted a new Russian-Iranian proposal to divide the Caspian into zones, giving each nation exclusive use of resources within 45 miles of its shore and joint use of resources beyond that.
Early this year, Turkmenistan claimed Azeri and Chirag fields lie in its sector of the Caspian (OGJ, July 28, 1997, p. 26).
Azerbaijan refuted that claim and went on to sign a pact with the Russian firms to develop Kyapaz, which is 184 km east of Azerbaijan and only 104 km from the coast of Turkmenistan
Turkmenistan demanded the deal be killed and proposed an Azerbaijani-Turkmen commission be created to set a boundary between the two countries.
Russia weighs in
Failing to get a response from Azerbaijan, Turkmenistan then persuaded the Russian government to annul the pact.By thwarting the deal, Russia managed to mollify its potential ally Turkemenistan and sting Azerbaijan, which wants to undercut Russia's influence in the Caspian.
President Boris Yeltsin explained the deal had been a "mistake" on the part of the Russian oil companies since his government had not been informed beforehand-although Russian First Deputy Prime Minister Boris Nemtsov had attended the negotiations that preceded the signing ceremony.
Azerbaijan then conceded in August that Kyapaz should be jointly developed by the two nations. But Turkmenistan said it would exploit Kyapaz (which it calls Serdar field) with the National Iranian Oil Co. and an unnamed Russian company.
Azerbaijan next said it would accept the Turkmen proposal to use a joint commission set a border in the Caspian between the two nations.
While the Kyapaz dispute lingers, it shows that all Caspian nations need to resolve the ownership of this embattled body of water.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
