Treaty on maritime rights to boost Caspian Sea oil and gas extraction

Talal Husseini 13 August 2018 (Last Updated August 13th, 2018 12:08)

Five Caspian Sea states have reached an agreement on sovereign maritime borders, which allows each country to lay oil and gas pipelines offshore without requiring prior consent from every other nation.

Treaty on maritime rights to boost Caspian Sea oil and gas extraction
Five states located on the Caspian Sea have signed a treaty specifying maritime borders, allowing for new oil and gas extraction opportunities. Credit: Dragonoil.

Five Caspian Sea states have reached an agreement on sovereign maritime borders, which allows each country to lay oil and gas pipelines offshore without requiring prior consent from every other nation.

After more than 20 years of disputes, each state will be able to lay oil and gas pipelines with the consent of affected neighbouring states only.

The countries involved, namely Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan, have attempted to define the legal status of the Caspian Sea since the break-up of the Soviet Union.

The new treaty clarifies previous territorial disputes in the region, which has prevented the exploration of more than 20 billion barrels of oil and 240 trillion cubic feet of gas, according to estimates from the US Energy Information Administration.

Kazakhstan President Nursultan Nazarbayev said: “Many years of thorough work have culminated today in the signing of the Convention on the Legal Status of the Caspian Sea.”

The treaty secures the special legal status of the Caspian Sea as a sea, ending disputes over whether the body of water was classified as a lake.

Russian deputy foreign minister Grigory Karasin said: “The Caspian Sea will have its own legal status. The five littoral states will have the full jurisdiction over resources in their sectors of the seabed.”

Eurasia Group analyst Zachary Witlin noted that one outstanding issue is the distribution of rights to seabed oil and gas deposits. He wrote: “Further talks will be needed to provide full legal clarity on the boundaries of the division and future rights to either contested or undiscovered fields.”

Under the treaty, the rights to certain undiscovered seabed reserves will be regulated by separate deals between the states, in line with international law. Kazakhstan and Russia have already made bilateral accords on joint projects in the region.

The five Caspian Sea states already own established offshore oil and gas pipelines to reserves in undisputed coastal areas. Kazakhstan’s Kashagan field and Russia’s Filanovsky and Korchagin reserves are set for future production boosts.

The treaty will also remove a barrier for the Trans-Caspian gas pipeline from Turkmenistan to Europe. The barrier is removed as only Turkmenistan and Azerbaijan need to agree on the pipeline under the new law. Previously, all five states would have had to approve its construction.

However, a spokesperson for the Oxford Institute for Energy Studies said last month that “political and strategic obstacles would remain” as Russia has opposed the construction of the pipeline, citing environmental concerns. The European Union and Azerbaijan have previously shown their support for the proposed pipeline project.

The Oxford Institute added that the Trans-Caspian pipeline is currently uneconomical, given that the cost of transporting gas from the region to Europe would make it less competitive than other options, such as additional Russian shipments of liquefied natural gas.