3. Caspian Oil and Gas
3.1. Current Trends of Gas and Oil Production and Demand
the only export route out of Turkmenistan at that time. This was one of the first examples of energy disagreements between Russia and Turkmenistan which made a huge impact on energy trade relations in the Caspian basin which have lasted through today.
Figure 3.1. Oil output in major CIS producing countries, 1991-2007 (mt)
0 10 20 30 40 50 60 70
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
0 100 200 300 400 500 600 700
Kazakhstan Azerbaijan Turkmenistan
Uzbekistan Russia (rhs)
Note. The scale for Russia (right vertical axis) is ten times larger than for the other coun-tries.
Source: BP (2008).
Figure 3.2. Gas output in Major CIS producing Countries, 1991-2007 (bcm)
0 10 20 30 40 50 60 70 80
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
0 100 200 300 400 500 600 700 800
Kazakhstan Azerbaijan Turkmenistan
Uzbekistan Russia (rhs)
Note. The scale for Russia (right vertical axis) is ten times larger than for other countries.
Source: BP (2008).
Central Asia’s decline in oil and gas production in 1990s can be explained by the hardships of the transition period, particularly the lack of new investment. Only at the end of the 1990s did the inflow of foreign investments enable the Caspian countries to considerably increase their extraction of both oil and gas. Overall, oil and gas pro-duction increased by 87% in the countries of Central Asia and Azerbaijan between 1990 and 2006. At the same time, aggregate consumption of oil in these countries declined by 30.5% while gas consumption increased by 33.1%.
Taken together, these trends indicate a much faster growth of oil and gas pro-duction than domestic demand for these resources, increasing the export potential of the region. This has been possible thanks to foreign investments in the sector and the establishment of new relations between the countries importing and export-ing energy.
Thus, the share of individual countries in the total oil and gas production of Caspian countries (Russia included) changed between 1990 and 2006. Oil produc-tion in Azerbaijan increased from 12.5 to 32.5 mt and its share increased from 2.2 to 5%. In Kazakhstan, oil production increased from 25.8 to 66.1 mt., i.e. from 4.6 to 11%, while in Russia, production decreased from 515.9 to 470 mt and its share was reduced from 91.7 to 82%. (See Figures 3.3-3.4).
Figure 3.3. Oil Production in Caspian Countries without Russia, 1990 and 2007 Oil production, 1990 (Mt)
Kazakh stan;
25.8
Azerbai jan;
12.5 Uzbekis
tan; 2.8 Turkme
nistan;
5.3
Oil production, 2007 (Mt)
Kazakhs tan; 68.7
Azerbaij an; 42.8 Uzbekis
tan; 4.9 Turkme
nistan;
9.8
Source: BP (2008).
Uzbekistan’s share of total gas production of the Caspian region (including Russia) increased from 5 to 7% (from 38.1 bcm to 55.4 bcm). Kazakhstan’s in-creased from 1 to 3% (from 6.6 bcm to 23.9 bcm), while Turkmenistan’s share
de-creased from 11 to 8% (from 81.9 bcm to 62.2 bcm). Russia’s share remained at the level of 80-82% (598-612 bcm). (See Figure 3.5).
Figure 3.4. Oil Production in Caspian Countries and Russia (1990 and 2007) Oil production, 1990 (Mt)
Azerbai jan;
12.5
Russia;
515.9 Turkme
nistan;
5.7 Kazakh
stan;
25.8 Uzbeki
stan;
2.8
Oil production, 2007 (Mt)
Azerbai jan;
42.8
Russia;
491.3 Turkme
nistan;
Kazakh 9.8 stan;
68.7
Uzbeki stan;
4.9
Source: BP (2008).
Figure 3.5. Gas Production in Caspian Countries and Russia, 1990 and 2007 Gas production, 1990 (Bcm)
Uzbeki stan;
Kazakh 38.1 stan;
6.6
Turkme nistan;
81.9
Russia;
597.9 Azerbai
jan; 9.2
Gas production, 2007 (Bcm) Uzbeki
stan;
58.5 Kazakh
stan;
27.3
Turkme nistan;
67.4
Russia;
607.4 Azerbai
jan;
10.3
Source: BP (2008).
Kazakhstan is the largest oil producer in the region after Russia. Its share in re-gional production (Russia excluded) increased from 55 in 1990 to 64% in 2006.
Azerbaijan comes in next with a share of 27% in 1990 and 29% in 2006.
As for gas production, Turkmenistan’s share was reduced from 60 to 43% and it is expected to keep the leading role thanks to large reserves. Uzbekistan follows as the next largest gas producer. However, while Uzbekistan’s internal consumption absorbs 78% of gas production, Turkmenistan exports three quarters of its gas pro-duction (See Figure 3.6).
Figure 3.6. Gas Production in Caspian Countries without Russia (1990, 2007) Gas production, 1990 (Bcm)
Kazakh stan;
6.6 Azerbai
jan; 9.2 Uzbeki
stan;
38.1
Turkme nistan;
81.9
Gas production, 2007 (Bcm)
Kazakh stan;
27.3 Azerbai
jan;
Uzbeki 10.3 stan;
58.5
Turkme nistan;
67.4 Source: BP (2008).
Oil consumption was reduced almost by a half in 1990-2006 in Kazakhstan, Azerbaijan and Russia together. It only increased in Turkmenistan by 11.8%.
Uzbekistan continues to import oil to meet its internal needs, but thanks to the growth of its internal output, the share of imported oil was reduced almost two-fold and the share of gas export increased. While Uzbekistan was consuming 96.6% of internally produced gas, in 2006 this rate was reduced to 79 %. Consumption in-creased from 36.6 bcm in 1990 to 43.2 bcm in 2006 due to the growth of gas ex-traction. However, Uzbekistan continues to consume most of its gas output domes-tically.
The rate of domestic consumption was considerably reduced in Kazakhstan – from 189.4% of total gas production in 1990 to 84.5% in 2006. In Russia, during the same period this rate remained unchanged (about 70-72%).
At present, the countries of the Caspian do not account for a large share of world oil and gas production. However, their confirmed reserves, together with the perspective of the development of transport infrastructure in the region may enable them to increase this share. In 2006, Azerbaijan’s share was 0.8% of world oil pro-duction. Kazakhstan’s share was 1.7%.
Table 3.1. Oil production, consumption and export, 2006 (mt)
Oil production Oil consumption Oil exports
Azerbaijan 32.5 4.7 23.4 Kazakhstan 66.1 10.6 54.5 Turkmenistan 8.1 5.2 n/a Uzbekistan 5.4 6.9 n/a
Total 112.1 27.4 n/a
Source: BP, countries’ state statistical departments.
Table 3.2. Gas production, consumption and export, 2006 (bcm)
Gas production Gas consumption Gas export
Azerbaijan 6.3 9.6 0.65 Kazakhstan 24.6 20.2 7.80
Turkmenistan 62.2 18.9 48.50
Uzbekistan 55.4 43.2 12.60
Total 148.5 91.9 69.55
Source: BP, countries’ state statistical departments.
Between 1990 and 2006, total oil production in Caspian countries (without Rus-sia) increased more than two-fold, reaching 112.1 mt. During the same period, gas production increased minimally from 135.8 bcm to 148.5 bcm (BP, 2008). Taking into consideration the potential resources and production capacity of energy, we may conclude that this tendency will continue in the future.
Estimates show that the total volume of exports, with the account of confirmed reserves and the expected level of domestic consumption, may amount to 4.9 bil-lion tones of oil and 5.5 trilbil-lion cub.m of natural gas in the next 40 years. The an-nual export potential of the Caspian countries may reach levels of 150-170 mt of oil and 120-140 bcm of gas by 2015. These volumes may be even higher in 2020.
However, this will depend on the size of investment into oil and gas projects and pipelines, the economic and political situation in the region as well as a number of other factors.