Oil Production in the Caspian Sea

In recent years there has been renewed speculation as to how the issues surrounding exploitation of the oil resources in the Caspian Sea might be resolved. In particular, Russia and Iran are seen as the major players in the development of the energy resources of the Caspian Sea and any agreements will have important implications for the other countries in the region.

Overall, the countries set to benefit from the oil reserves in the Caspian Sea are Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan - often referred to as the littoral states. However, full development of the region can only occur when the complex political, geographical and financial concerns between these states have been properly addressed. Uzbekistan, although not a littoral state, is the region's leading producer of natural gas producer and therefore has some bearing on Caspian Sea issues (1).

Most of the oil reserves in the Caspian Sea region have not been developed and many observers believe that there are considerable untapped resources. Estimates of the oil reserves vary, ranging from those claiming that the Caspian region is a new "Middle East" to more conservative estimates of 30 billion barrels of reserves, modest in world terms. However, as the global demand for oil continues, the Caspian Sea has remained an attractive area for investment by international oil companies. The interplay of all these interest groups has transformed the exploitation the Caspian Sea oil resources from a regional concern into an international concern. Continuing regional instability has also made the future of oil exploration in the region uncertain.