Published in Oil & Gas Executive Report, Volume 2, Number 3, 1999, pages 22–28.

In recent years, the Caspian Sea region has been both the blessing and bane of the world oil and gas industry.

Rich in petroleum resources - but short on infrastructure and access to major markets - the area's contribution to the world's future energy mix is fraught with controversy. Promising business deals can be delayed by uncertain politics and thorny legal issues surrounding resource ownership, in a region where developing and moving oil to market involves negotiations with three or more of the seven national governments in the region (see map and inset). Likewise, once-promising formations can yield disappointing, non-commercial results, as happened several times last year.

Geoffrey Kemp, director of regional strategic programs for the Nixon Center, termed the Caspian Sea region "exciting but troublesome" at a recent Washington, D.C. conference on the region's issues sponsored by the Society of Petroleum Engineers. The key countries surrounding the Caspian Sea - Azerbaijan, Turkmenistan, Uzbekistan, Russia and Kazakhstan—are racked by both economic and political instability. Iran, flanking the southern shore, is subject to longstanding trade sanctions that limit foreign investment. While not part of the unstable Caspian mix, NATO ally Turkey is also involved in negotiations for possible pipeline routes to world markets.

Nevertheless, the region's major players are hanging tight, despite the region's inherent challenges and a roller-coaster plunge in prices that has eased only recently. At the SPE conference, some of the world's foremost texperts on the Caspian Sea voiced considerable agreement that there's reason to remain optimistic about the region's future.

Although opinions varied about the timing and magnitude of the region's energy development, most agreed that the Caspian Sea remained a worthwhile investment for players able to endure the often-long wait and frustrations involved in getting projects moving.

Commented Nick Zana, managing director of Chevron's Eurasian business unit:"There's far too much at stake to stop investing. We formed our partnerships in the Caspian region for the long term, and we're going to stay for the long term."

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