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By Mike Collett-White
BAKU, Dec 15 (Reuters) - Russia, casting a rueful gaze over a lost oil empire in the Caspian, will find it tough going to regain even a vestige of the power it once wielded over what has been hailed the world's great new energy frontier.
Billions of dollars of oil and gas investments have poured into developing hydrocarbon lakes lying under its waters, and many tens of billions are still to come.
Seven years ago, all of this would have been Moscow's. But since the Soviet Union collapsed in 1991 it is newly independent states bordering the resource-rich water body which are reaping the benefits of the Caspian oil boom.
Nowhere is this more obvious than in the bustling Azeri capital of Baku, where the black gold rush has quickly returned the city to its former splendour.
No former Russian colony is ready to bow to Kremlin pressure as in the old days. Oil, they argue, is a powerful enough tool to secure independence and create unimaginable wealth.
Moscow is aware of oil's strategic and economic importance -- not only to the region, but to Western governments who want to secure a diverse energy base for the future. Most prominent among them is the United States.
''We must in no way allow our influence in the Caspian region to weaken,'' declared Russia's dynamic First Deputy Prime Minister Boris Nemtsov recently.
RUSSIA'S LOSS IN TERMS OF RESOURCES IS HUGE
A breakdown of former Soviet littoral states' estimated Caspian hydrocarbon reserves shows just how much Russia has lost and how much Azerbaijan and Kazakhstan have gained.
Semi-official Russian geological estimates show that if the Caspian is divided into sectors, initial potential recoverable resources in the Kazakh area total 4.5 billion tonnes of oil equivalent, or 32 billion barrels.
The Azeri sector is not far behind with 4.0 billion tonnes (or around 28 billion barrels).
Russia comes third with 2.0 billion tonnes (14 billion barrels), just ahead of Turkmenistan with 1.5 billion tonnes (11 billion barrels) of oil equivalent.
The Azerbaijan International Operating Company (AIOC), an 11-member international consortium led by a British Petroleum -Statoil alliance, will pay $8 billion to tap less than one sixth of the estimated Azeri reserves alone.
The Kremlin has attacked the problem of its waning influence in the Caspian in three ways.
The first, and least convincing, is to continue to claim partial ownership of oil and gas lying under water.
Russia and Iran officially treat the Caspian as a giant lake, the spoils of which should be divided evenly between the five littoral countries.
Azerbaijan, Kazakhstan and Turkmenistan counter that the Caspian is a sea, and should be divided into sectors which would then be developed by each country separately.
But they cannot agree on where the dividing lines fall, and are still squabbling over some of the biggest reserves, including those already under AIOC contract.
As oil exploration and development continues apace despite rumblings of a row over status, Russia's aim to work jointly is likely to be given short shrift.
''This policy is driven by the Ministry of Foreign Affairs, which is still pushing for a condominium development of the Caspian,'' said Julian Lee, oil analyst at the Centre for Global Energy Studies, who specialises in the former Soviet Union.
''But they seem to be losing ground in this area.''
UNOFFICIALLY, MOSCOW HAS PROMOTED RUSSIAN COMPANIES
A more practical solution to redefining Moscow's role in the Caspian basin has been to push for the interests of Russian oil companies, particularly its biggest group, LUKoil.
''Another way for Russia to maintain some influence has been for Russian companies to penetrate into the region,'' explained Professor Yevgeny Khartukov, general director of the International Centre for Petroleum Business Studies in Moscow.
''LUKoil was really a diplomatic flagship for the rest of the Russian oil industry,'' he added.
LUKoil has a stake in the two biggest international Caspian consortia so far -- the AIOC and the $20-billion Tengizchevroil onshore development in Kazakhstan. Both groups are due to hit peak output of about 800,000 barrels a day early next century.
It was also declared winner of a tender to develop major resources off the Russian Caspian coast with up to 600 million tonnes, although some estimates are as low as 150 million.
Consortia are happy to have Russian representation on board, since a superpower's presence in the region cannot be ignored. The wider the spread of participants the better, industry executives argue.
''From the eleven companies in the (AIOC) consortium, (Azeri President) Haydar Aliyev has a geo-political spread that is important to his country,'' said AIOC President Terry Adams in an interview.
MOSCOW'S BEST HOPE IS SECURING PIPELINE ROUTES
But the Kremlin is clearly pinning most hope on a third Caspian policy option -- pipelines. Caspian oil is worth nothing until it is sold to world markets, meaning that the exporter of the crude has as much influence as the producer.
Moscow has already scored two notable victories in the battle to transport Caspian oil west to the Black Sea.
The biggest was the $2-billion Caspian Pipeline Consortium, which will carry up to 1.34 million bpd by 2014, leaving plenty of room for other oil after Tengiz crude is included. The CPC crosses Russia ending up in the Black Sea port of Novorossiisk.
The second feather in the Kremlin's cap was to win a contract to carry small-volume, ''early'' AIOC oil from the Azeri-Russian border to Novorossiisk.
This was only after intense negotiations with Russia's rebellious region of Chechnya, across whose territory the pipeline runs. Moscow plans to build a new pipeline section around Chechen territory to secure supplies in future.
What Russia wants now is to win the ''main'' AIOC oil route, giving it a dominant position over western oil exports from the Caspian for several decades.
''We need to win the right to transport main Caspian oil against international competition,'' Nemtsov said. ''We have won the first round with early Azeri oil passing through Russia, but that is only the beginning.''
Against him is the formidable triad of Azerbaijan, Turkey and the United States, who want the oil to pass instead from Baku to Turkey's Mediterranean port of Ceyhan, thereby by-passing the already crowded Bosporus.
''We believe that the Baku-Ceyhan route will be one of the main routes for Azeri exports,'' Aliyev said in Baku last month at the AIOC first-oil ceremony.
While the official reason for supporting the Baku-Ceyhan line is environmental, no former Soviet republic will choose to rely on Moscow for its livelihood if it can possibly help it.
01:16 12-15-97 |
