Regional Update: The Caspian Sea

A regional update on the resource and political situation in the Caspian Sea.
This article appeared in Vol. 18, No. 6 - 2021


Regional Update: The Caspian Sea

The Caspian Sea is shared between Iran, and the four former Soviet republics of Azerbaijan, Kazakhstan, Russia and Turkmenistan. In August 2018, in a landmark deal between the five countries, the Convention on the Legal Status of the Caspian Sea was signed in the Kazakh city of Aktau. After more than 20 years of negotiations, this establishes a process for dividing up the Caspian Sea’s resources and prevents powers from establishing a military presence. So far, only Russia, Azerbaijan, Kazakhstan and Turkmenistan have ratified the Convention and it is understood that the government of Iran has yet to send the draft law to the legislature.

Up until 1991 the situation was less complicated as the Caspian Sea was shared between Iran and the Soviet Union. Iran treated the body of salt water as a lake, but the other countries did not agree and recognised it as a sea. Thus, it is considered by the former Soviet Union countries as under the 1982 United Nations Convention on the Law of the Sea (UNCLOS). However, if the Caspian Sea is legally classified as a ‘lake’, then international law concerning border lakes would apply.

  • Map of Caspian Sea showing territorial borders and main hydrocarbon accumulations.

The disagreement between the former Soviet Union countries over its legal status has prevented a gas pipeline being built across the Caspian between Turkmenistan and Azerbaijan. A direct pipeline would have allowed Turkmen gas to bypass Russia on its way to Europe rather than by other costly routes. In principle the international maritime law convention allows pipelines to be built under agreements between affected countries, rather than needing approval from all five nations. 

There are two main disputes in the Caspian Sea involving hydrocarbons. One involves the Araz-Alov-Sharg oil and gas fields between Iran and Azerbaijan. The second is the dispute between Azerbaijan and Turkmenistan over the Serdar/Kapaz oil field. The field is referred to as Kapaz by Azerbaijan and Serdar by Turkmenistan. In a positive move in January 2021, Azerbaijan and Turkmenistan signed a Memoradum of Understanding (MoU) for the joint exploration of the Serdar/Kapaz and renamed it the Dostluk (‘Friendship’) field.

LUKOIL is the biggest acreage holder in the Caspian Sea followed by KazMunaiGas, SOCAR, Rosneft and Yuzhmorgeologiya. Through its position in Azerbaijan, BP is the biggest international acreage holder. Since opening its office in Baku in 1992 it has invested almost US$80 billion in the Azeri-Chirag-Gunashli (ACG), Shah Deniz, Baku-Tbilisi-Ceyhan (BTC) and South Caucasus Pipeline (SCP) projects. 

In September 2021 BP announced it had agreed to sell a 25% participating interest in the Shallow Water Absheron Peninsula (SWAP) Production Sharing Agreement (PSA) in the Azerbaijan sector of the South Caspian Sea to LUKOIL. BP will remain operator of the SWAP PSA during the exploration period, holding a remaining 25% interest. The first exploration well in SWAP was spudded in the North Khali Prospective Area in August 2021. The well is designated NKX01 and is being drilled by the jack-up rig Satti in 22m of water. The well is thought to target a large anticline with Pliocene Productive Series sandstones as the main objective. Two further exploration wells are planned in the Qarabatdag and Bibiheybat prospective areas.

Further Reading

A few articles from the GEO ExPro archives on hydrocarbon exploration in the Caspian Sea.

Resource Nationalism in the Caspian
Dr. Nadir Gohari, Global Risk Intelligence
The proliferation of resource nationalism in the Caspian Sea littoral states is often perceived as a risk - but should it be considered an opportunity?
This article appeared in Vol. 14, No. 3 - 2017

Caspian Sea: Frontier Exploration in the Middle Caspian Basin
Jaswinder Mann and Gregor Duval, CGG
CGG multi-client 2D seismic data across the Central Caspian Sea helps provide understanding of current and new petroleum systems in a frontier area.
This article appeared in Vol. 11, No. 4 - 2016

Jurassic Hydrocarbon Reservoir Systems of the Central Caspian
Graham Blackbourn, Blackbourn Geoconsulting
The Caspian Sea accommodates three major petroleum systems. Here, we take a look at the Jurassic hydrocarbon reservoir systems of the Central Caspian.
This article appeared in Vol. 10, No. 5 - 2013


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