Caspian oil and gas exports are poised for take-off

15 March 2011

Oil and gas exports from the Caspian region could more than double over the next 25 years, the International Energy Agency’s (IEA) Deputy Executive Director, Richard Jones, has said.

“Ample reserves and an emerging diversity of export markets are driving the Caspian contribution to the global energy balance,” Ambassador Jones explained during a recent visit to Azerbaijan and Kazakhstan.

Azerbaijani natural gas, potentially joined by other sources of gas from the Caspian and Middle East, is set to open up a new southern corridor for gas supply to Europe over the next few years.

The IEA projects that gas production in Azerbaijan will rise from around 17 billion cubic meters (bcm) a year – its current level – to 50 bcm by 2035, of which 35 bcm will be for export. The initial increase in gas production in the latter half of this decade, according to IEA analysis, is expected to come from the second development phase of Shah Deniz (the largest natural gas field in Azerbaijan).

This influx of gas from Azerbaijan will help European countries meet their rising requirements for imported gas, in particular for electricity generation. In 2008, countries in the European Union needed 320 bcm of imported gas, but this is projected to rise to over 500 bcm in 2035, that’s a jump of 58%.

Positive impact of gas exports

Ambassador Jones argued that exports from Azerbaijan and other Caspian countries will have a positive impact on energy security (the uninterrupted availability of energy sources at an affordable price) in both Europe and China.

“In our projections, Azerbaijan is the largest Caspian gas exporter to Europe, while Turkmenistan is the main source of Caspian exports to China,” he explained. “In both cases, Caspian gas is set to provide an important element of market diversity.”

To the east of the Caspian Sea, in Central Asia, the opening of a new gas pipeline between Turkmenistan and China in 2009 has marked a major shift in the region’s gas sector. Prior to 2009, most of the routes to market for gas exporters in Central Asia ran through Russia. However, with the new 7,000 km gas pipeline to China already being expanded, China is set to have a strong influence on Caspian trends in gas production and trade, both as a source of investment and as a major export market.

Kazakhstan’s oil boom is far from over

Significant potential for growth does not just come from gas, Ambassador Jones observed, pointing out that oil from the Caspian region will also play its part in enhancing global energy security.

IEA analysis confirms very strong potential for growth in oil supply in Kazakhstan, even though uncertainty remains over the timing of this expansion. In the short term, the main impetus to oil supply will come with the long-delayed start of production from the super-giant Kashagan field, expected in 2013.

Further development of the Kashagan field, together with contributions from the Tengiz, Karachaganak and eventually other offshore fields, pushes Kazakhstan’s projected oil output towards four million barrels per day by the mid-2020s. (In 2010, globally 87 million barrels of oil were produced and refined every day).

“If this projection became reality, this would reinforce Kazakhstan’s critical role for global oil security,” he said. “Dependable supplies of Kazakhstan oil to both European and Asian markets will reduce the need of those regions to import oil from the Middle East by tanker via vulnerable routes, such as the Straits of Hormuz, the Suez Canal and the Straits of Malacca.”


While confirming the region’s potential for growth in production and exports, the IEA’s Deputy Executive Director also stressed some of the difficulties that could constrain this expansion. These include the perennial issue for landlocked Caspian countries of financing and constructing the infrastructure to get resources to international markets, and ensuring the reliable operation of complex export routes that cross multiple national borders. There are also uncertainties in some countries over the quality of governance and the climate for the huge investments that will still be required.

World Energy Outlook 2010 – Caspian Energy Perspectives (Available in Russian)

Ambassador Jones presented analysis from the IEA World Energy Outlook 2010, which included an in-depth look at Caspian energy perspectives. The figures and projections mentioned here are from the New Policies Scenario, the central scenario.

A translation of the three Caspian chapters from the IEA World Energy Outlook is now available in Russian. Click here to download.

Caspian region
The IEA analysis in the World Energy Outlook 2010 covers a diverse group of countries in the South Caucasus and in Central Asia: Armenia, Azerbaijan and Georgia in the South Caucasus; and Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan on the eastern side of the Caspian Sea.

Photo: Ambassador Richard Jones, being interviewed by Kazakhstan television. © IEA