Most Recent Action    Current Congress    Hearing Summaries

Caspian Sea Oil and Gas Exploration
Update and Hearing Summary (5-16-00)

As global energy consumption continues to rise, the Caspian Sea region is being touted as the last frontier of exploration. Proven reserves in this area are estimated to be 15-29 billion barrels of oil, and an additional 100 billion barrels may exist. The Caspian Sea borders Russia, Iran, Azerbaijan, Kazakhstan, and Turkmenistan. Proposed pipeline routes include lines from the Caspian Sea through Turkey to the Mediterranean Sea, Georgia or Russia to the Black Sea, and Iran to the Persian Gulf. The Administration opposes any route through Iran, which is prohibited by the Iran-Libya Sanctions Act.

Most Recent Action
According to the Washington Post (5-16-00), a group of western oil companies  --  including American companies Exxon Mobil and Phillips Petroleum  --  has found a major new petroleum reserve in the Caspian Sea.  The large reserve is located off the coast of Kazakhstan in the northern Caspian Sea.  The new discovery, which is speculated to contain between 8 and 50 billion barrels of oil, will most likely speed up the race to develop a new pipeline system.  If the oil field contains amounts close to the high end of the estimated amounts, it would be larger than the North Sea oil fields.

The Senate International Economic Policy Subcommittee held a hearing titled Status of Infrastructure Projects for Caspian Sea Energy Resources on Wednesday, April 12th.  Witnesses included representatives from the administration, BP Amoco, the Petroleum Finance Corporation, and the Carnegie Institute.  Senator Chuck Hagel (R-NE), who presided over the hearing, mentioned the discovery of recent new natural gas reserves in Azerbaijan's waters and new oil exploration in the northern part of the Caspian Sea.  In his opening statement, Hagel stated that he was interested in hearing how the country can "encourage Caspian Sea energy development in a way that serves U.S. interests in supporting the independence and sovereignty of the newly emerged nations of the region."  Written testimony from some of the witnesses is available on the Committee's website.

Current Congress
The Senate International Economic Policy, Export and Trade Promotion Subcommittee held several hearings on the topic during the 105th Congress and picked up where they left off by holding a hearing on March 3, 1999.

This region is also the subject of legislation in both the House and Senate that would increase US foreign economic assistance to the oil-rich countries of Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyztan, Tajikistan, Turkmenistan, and Uzbekistan. The White House supports this effort to strengthen US ties to the region, which could someday reduce US reliance on oil imports from the Persian Gulf region. S. 579 and H.R. 1152, both entitled the Silk Road Strategy Act of 1999 after the historic trade route through that region, would amend the Foreign Assistance Act of 1961. The Senate Foreign Relations Committee passed S. 579, introduced by Sen. Sam Brownback (R-KS), in March. The House International Relations Subcommittee on Asia and the Pacific approved H.R. 1152, introduced by subcommittee chair Rep. Doug Bereuter (R-NE), in mid-June.

Hearing Summary
Senate International Economic Policy, Export and Trade Promotion Subcommittee Hearing
March 3, 1999

Senator Chuck Hagel chaired this hearing, which consisted of two panels. The main witness in the first panel was Richard Morningstar, special advisor to the president and secretary of state. Three witnesses testified in the second panel: Mr. Edward Smith, President and CEO of Pipeline Solutions, Mr. J. Michael Stinson, Senior Vice President of Conoco, and Ms. Maureen Greenwood, Advocacy Director for Europe and the Middle East for Amnesty International. The full written testimony of the witnesses is available on the Foreign Relations Committee website.

Richard Morningstar testified that US policy in the Caspian region addresses four main objectives:

Morningstar said that the US role in this region is to facilitate discussions for development of a pipeline. He said that the US endorses five pipelines in the region: the two early routes (the northern route to the Russian Black Sea port of Novorossiysk and the western route to the Georgian Black Sea port of Supsa); Caspian Pipeline Consortium from Kazakhstan to Novorossiysk; Trans-Caspian Gas Pipeline and the Baku-Ceyhan Main Export Pipeline. Morningstar also said that the costs of the proposed Baku-Ceyhan pipeline is estimate to be approximately $3 billion, which he said may be feasible if Turkey offers incentives for development.

He also spoke about the Caspian Sea Initiative, a joint effort between the Trade and Development Agency, Overseas Private Investment Cooperation, and Export-Import Bank. In addition to funding a feasibility study on a pipeline, this group has opened the Caspian Finance Center in Ankara, Turkey.

Mike Stinson testified that due to low prices, oil from the Caspian region may not prove to be a good investment. He said that "most energy companies operating in the East Caspian believe a transport route through Iran would be highly competitive and probably represent the lowest capital costs." He criticized the Administration for lobbying for alternate routes, and urged them to repeal the Iran-Libya Sanctions Act, saying it "is proving to be a counter-productive foreign political tool." He said, "Iran is a potentially important key to unlock access to the rich resources of the Caspian region." He also urged the repeal of Section 907 of the Freedom Support Act to allow Azerbaijan to participate in this process.

Maureen Greenwood testified on behalf of Amnesty International. She said, "As Congress considers the Caspian Sea pipeline, support for human rights improvements and democratic institutions needs to be integrated as a fundamental pillar of US diplomacy." She cited opportunities for both the government and private companies to ensure human rights.

Edward Smith said that the success of the TransCaspian project is critical to the interests of the United States in the region and that the project will not succeed without the active support and assistance of the United States Government. He said that support is required in two areas: "helping to solve geopolitical threats to the project and providing critical support to the private lenders and investors in the project through the financing and insurance programs of OPIC and USEXIM, technical support from TDA and the support of the US." He also testified that the US should work quickly on a pipeline, as there are other efforts occurring now.

Sources: Hearing testimony, Environment and Energy Weekly

Please send any comments or requests for information to the AGI Government Affairs Program.

Contributed by Kasey Shewey White and David Applegate, AGI Government Affairs, and Alison Alcott, AGI/AAPG Geoscience Policy Intern

Posted March 25, 1999; Last Updated May 16, 2000

  Information Services |Geoscience Education |Public Policy |Environmental
Publications |Workforce |AGI Events

agi logo

© 2016. All rights reserved.
American Geosciences Institute, 4220 King Street, Alexandria, VA 22302-1502.
Please send any comments or problems with this site to:
Privacy Policy