Jungle Investor,
I read the very interesting Lawrence Sheets article regarding Caspian Sea. I copied it yesterday and when I went back today to copy the URL, the article is no longer available. I have therefore selected portions of the article and posted them below:
EXTRACTS FROM Lawrence Sheets Caspian Sea Article:
"Oil slump, Caspian woes jolt Azerbaijan"/By Lawrence Sheets
BAKU, Feb 19 - Oil man Paul Justice is packing up his handmade Azeri rugs and collection of ceremonial daggers. He is leaving Baku and the Caspian oil business behind. He is one of hundreds of foreigners, from oilmen to bar owners, on the way out of the de facto capital of the Caspian oil business. The exodus has brought a more sober reality to a city which has ridden a crest of oil euphoria for several years.
Rock-bottom world oil prices, combined with the risky and relatively expensive nature of Caspian projects, as well as speculation that the much-publicized wealth beneath the Caspian Sea may have been exaggerated, are the main culprits.
The recent price crunch, in which crude prices have plummeted to historic lows of around $10 a barrel, have led some to question the wisdom of new Caspian projects, where start-up and infrastructure costs are high. Augmenting that are recent disappointing drilling results.
A Pennzoil-led consortium, the Caspian International Operating Company (CIPCO), closed down in January after poor test results, nullifying as much as $3 billion in investment for the former Soviet republic had it gone ahead. Justice had been assigned to the CIPCO project for the last two years, but his dismissal was part of a general belt-tightening under way here by oil majors.
Another group, the BP Amoco -led North Absheron Operating Company (NAOC), is drilling its final test well after two unsuccessful initial attempts. Oil sources say it is all but certain it will shut down later this year.
A much-publicized planned major pipeline, which might cost as much as $4 billion, to ship Caspian output to Western markets has been shelved indefinitely, sources close to the project here say. Azerbaijan, the U.S. and Turkey want the route to go from Baku to Turkey's Mediterranean port at Ceylan.
"Exploration can be carried out fairly cheaply. We're likely to see that continuing, but in many cases actual drilling, if oil is found, may be put on hold until a big jump in prices," said one Western oil representative in Baku.
The only consortium actually producing, the $11 billion BP Amoco-led Azerbaijan International Operating Company (AIOC), has slashed spending and delayed the main part of its planned investment programme. Former AIOC chief Terry Adams, now with British Monument Oil and Gas, said recently there was a consensus that Caspian projects were not profitable at prices below $12.
Englishman Kenneth Winston Barrett, who opened two British-style pubs, O'Malley's Irish Bar and Winston's said: "Business is way, way down. The foreigners are leaving, and I don't see anything changing for at least the next year or so," said Barrett, who is closing his businesses and leaving Baku after seven years. Barrett says according to his figures as many as 2,500 foreign nationals have left Baku over the last few months. Air routes into the city are being cut as fewer foreigners are flying.
Baku had been the oil world's sexiest new address in recent years, driven by a craze over Caspian resources that in some cases was fueled by Western governments. U.S. State Department estimates of the region holding 200 billion barrels of crude are now widely acknowledged to have been exaggerated."
At any other time an article such as the above would have sent crude prices soaring. Crude is so beaten down that nothing seems to turn it around.
K |
