Iran seeks to be outlet for Caspian Sea oil

As territorial disputes grow over the Caspian Sea, Iran wants to become an outlet for oil exports from the promising but land locked region.

At a government-sponsored conference in Tehran last month, Iranian officials said their country offers a southbound export route that is less risky and more cost effective than the westbound pipeline projects now proposed.

The option of southward movement of oil away from the Caspian has received little attention outside of Iran. U.S. efforts to isolate the Islamic republic make financing doubtful for any major Iranian project.

And although the U.S. has failed to muster direct international support for its trade embargo on Iran, non-U.S. companies remain reluctant to make long term commitments in the countryin part for fear of alienating the U.S. government.

The day after the conference in Tehran, the U.S. Senate Banking Committee approved legislation that would impose sanctions on non-U.S. companies conducting significant amounts of business with Iran.

The U.S. government accuses Iran of supporting international terrorism and trying to build nuclear weapons. Iranian government officials deny the charges.

Regional tensions

Until Caspian Sea territorial questions are resolved, an Iranian outlet for the regions oil production may be no less likely to develop than are the two westward pipeline projects currently planned.

One of those projects would link Azerbaijan with Russias southern pipeline system for transport to Novorossyisk on the Black Sea, where there is a terminal that would have to be expanded. The other proposal would carry oil from Kazakhstan and Azerbaijan through Georgia and Turkey to a terminal at Ceyhan on the Mediterranean.

Speakers at the Tehran conference asserted that no pipeline project can proceed without the approval of Russia, which openly seeks to retain influence over former Soviet states on the Caspian Sea. Russias regional desires can only have been hardened by the victories of antireform candidates in parliamentary elections Dec. 17.

Although Moscow would hardly look kindly on an Iranian outlet for Caspian oil, which would involve no transit of Russian territory, it agrees with Iran on Caspian territorial issues. Both countries, as well as Turkmenistan, seek cooperative development of Caspian resources by the five coastal countries.

The other countries, Azerbaijan and Kazakhstan, support a partitioning of the sea similar to the division of the North Sea into national sectors. Both of those countries have oil and gas projects in the Caspian.

Conflicting views

Russian and Iranian officials at the Tehran meeting made strong appeals for regional cooperation. In their public comments, the Iranians referred only obliquely to the U.S. sanctions but spoke against external influences in the Caspian region.

Gholamreza Aghazadeh, Iranian petroleum minister, called regionalization of trade an indisputable fact today and urged the Caspian states to start a long-term process of cooperation.

He added: Superpower politics has never helped regional development.

M. Hashemian, president of the Institute for International Energy Studies, an affilate of Irans petroleum ministry, said Caspian issues should not be decided by strategic considerations of nonregional states.

And S. M. Hosseini, director of exploration for National Iranian Oil Co. (NIOC), said the need of Caspian states for technological help doesnt mean the countries should be overrun with foreign companies.

Sergei Tretiakov, Russias ambassador to Iran, couched his appeal for a cooperative approach to Caspian Sea development in ecological terms.

The Caspian Sea is not only oil, he said. It is fish, including the unique stock of sturgeon, and navigation and security interests and other problems.

Referring to projects planned off Kazakhstan and Azerbaijan, Tretiakov said, These actions, taken unilaterally, may have heavy consequences for the rather frail Caspian Sea ecological system. Until a Caspian legal regime is settled, he said, all these activities may be risky.

NIOCs Hosseini echoed the point with a barb at Azerbaijan, where a combine of international companies called Azerbaijan International Operating Co. (AIOC) plans production from Chirag and Azeri offshore fields and the deepwater portion of Guneshli field.

Unilateral action such as what Azerbaijan is doing is detrimental to establishment of a legal system for the Caspian region, Hosseini said. What produces long term security is cooperation on a regional level.

Irans relations with Azerbaijan have deterioriated since State Oil Co. of the Azerbaijan Republic (Socar), apparently under pressure from foreign partners in AIOC, withdrew an offer to sell Iran a 5% interest in the combine from its 20% share.

At the Tehran meeting, Socar Vice Pres. Khoshbakht B. Yusifzade responded directly to criticisms of his country. If its seabed it should have a boundary, he declared. Partitioning the Caspian Sea does not preclude negotiations.

In reply to Tretiakovs suggestion that common fishing interests made cooperation essential, Yusifzade declared, Oil and gas should not be combined with fish.

Irans export proposal

Irans southward export proposal for Caspian crude would at first involve swaps.

As described by Iranian officials, such a scheme could begin after construction of only 160 km of pipeline to connect the port of Anzali with existing pipelines in Iran. The crude would move to refineries in northern Iran. With only minor changes, officials say, the plants could process Caspian crudes.

Crude from southern Iranian fields, now shipped north to the refineries, would move instead to Kharg Island for export sales on behalf of countries supplying the refineries in the north.

Later, a pipeline along the eastern Caspian Sea could connect with existing crude lines in Iran, flow of which would be reversed to move oil to Kharg Island.

Iranians argue that their scheme would be cheaper and require transit of fewer international boundaries than any of the other pipeline export proposals.

In addition, the Iranian route via the Persian Gulf would give Caspian crude access to Asia. Mediterranian routes place Caspian crude in competition with growing volumes from several other sourcesincluding, eventually, Iraqin markets not growing as fast as those of Asia.

Asked if Iran would transport oil for AIOC even though it was excluded from the deal, H. Ghanimi Fard, NIOC director for international affairs, said, Iran has never said that it would not negotiate even though 40% of combine shares are held by U.S. companies.

We have no problems with American companies, he added.

The conference on Caspian issues followed by a month a 3 day meeting in Tehran at which Iranian officials unveiled technical details of 11 projects for which it is seeking participation by foreign oil companies.

Between 50 and 60 company representatives attended the November conference, according to sources present at that meeting. At the request of the companies, officials have revealed little about the conference and refused to identify participants.

NIOCs Fard told Oil & Gas Journal only that negotiations with companies that attended the earlier meeting were in elementary stages.