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What's Wrong With Azerbaijani Oil?
- Igor Muradyan
- http://www.lragir.am/index.php/eng/0/politics/view/27879
- Monday, 29 October 2012, 13:35
Great Britain has played a major role in ensuring stability and security
in the South Caucasus and the Caspian Sea by launching oil and gas projects
there. Great Britain cannot allow damage and destruction of oil production
and transportation facilities where it has invested 35-40 billion dollars.
British Petroleum (like Total of France) is a foreign political instrument
for the British government which cannot ignore the interests of this
company. BP's sales are lower than the sales of major U.S. oil companies
which, despite being an important political resource for the United States,
do not have a big role in the foreign policy of the United States.
At the same time, British Petroleum is not just a foreign political
instrument but first of all a commercial organization interested in the
strategic security of its business. BP is a global company, has a huge
experience of work in many countries and regions, including in exploration,
and it is not a major problem to estimate the oil reserves in the Caspian
region.
Oil mines in Azeri-Chirag-Gyuneshli were thoroughly studied in the Soviet
period, in the 1970-80s, and estimated at 540 million tons, which was oil
in place by the time of signing the Contract of the Century. The contract
for the production of Azeri, Chirag and the deepwater Gyuneshli was signed
on 20 September 1994 and entered into force on 12 December. In addition,
BP-Amoco's share was 34.1367 % but this U.S.-British company is actually
the operator and conductor of this project.
Later the reserve of these mines was estimated at a proven 940 million tons
and a confirmed 1.03 billion tons. During extraction in the framework of
the Contract of the Century (taking consideration of estimates for 2012)
288.5 million tons or 53.5% of initially proven and 30.7% of confirmed oil
reserves was extracted. In 2009 40.3 million tons was extracted instead of
the planned 46.8 million tons, in 2010 the estimated amount was 42.1
million tons, extraction totaled 40.6 million tons, and in 2011 extraction
was 36 million tons despite the estimate of 40.2 million tons. By the end
of 2012 33 million tons will be extracted though 35.6 million tons has been
planned.
The Azerbaijani side first explained decline by extraction problems. It
made allegations against BP without coming up with substantiated claims to
this company relating this issue. At the same time, judging by oil in place
and plans regarding decline in the extraction rate should not have been so
significant, and the rate of decline should have been less steep.
Apparently, the Azerbaijani leadership is taking precautions in case
decline of extraction is more significant as to lead to cardinal change in
the economic, social and political situation in Azerbaijan.
It is also necessary to take into consideration that despite fluctuations
the oil price is expected to continue to drop which, together with a
drastic decline in extraction, will end up in a catastrophe for Azerbaijan.
The launch of extraction and export of natural gas will mitigate the
consequences but gas is not oil in neither an economic, nor a political
sense.
In this situation doubts occur that from the very beginning of
implementation of the project the oil reserves were exaggerated, which is a
common practice among raw material companies for the purpose of boosting
capitalization of enterprise. Besides, despite efforts, it has been
impossible to reveal the rate of producible oil in these mines. Earlier the
rate of producible oil in the Caspian region did not exceed 60%.
Considering assessments by the coryphaei of geology in the Soviet Union
well-aware of the Caspian geology, the originally announced amount of 540
million tons or a little more was the real amount of producible oil. Hence,
over half of it has already been produced.
Assessments by British experts on energy hold that the amount of production
of oil may drop to 25 million tons. Ostensibly, if oil in place is about
250 million tons, its extraction will continue for 10 years or so. In this
case, the entire scheme of the political component of this project
including Baku-Tbilisi-Ceyhan will be destroyed. This pipeline will have to
be used to transport the oil of Kazakhstan which is mostly transported to
Chine or the Russian oil and in this case Russia may buy this oil pipeline.
Hence, running out of the Caspian oil at such a fast pace may lead to
political troubles, considering that Baku-Tbilisi-Ceyhan had first of all a
political nature and was therefore supported by the U.S. government. In
this regard, a strategy of prolonging the term of extraction was worked out
and it is possible that this strategy was drafted at the beginning of the
project. Earlier it had been supposed that the political leadership of
Azerbaijan is trying to save its oil for future generations but Baku's
current reaction defies any patriotic intention. The leader of Azerbaijan
aims at fast extraction of oil and gas to enrich himself, his family and
his clan in the shortest possible period.
Hence, the interests of the family ruling Azerbaijan contradict not only
BP's intentions but also the U.S. political interests, possibly also the
U.K.'s interests. It should be noted that from time to time BP has tried
certain initiatives on Azerbaijan's to lobby its interests. At the same
time, the company's representatives claimed that Azerbaijan is not an
important partner to make special efforts for its interests.
In 2005 certain timid efforts to lobby Baku's interests in European
organizations were made which ended up in a fiasco. There was an impression
that this fiasco was planned to demonstrate to Azerbaijan that these
efforts are futile and cannot lead to success. Some British experts think
the United Kingdom cannot afford to lobby Azerbaijan's interests because
it is not appropriate for a great power.
`The interests of the Aliyev family are appropriately represented in
London, which is sufficient.' The rookery of the ruling family is in London
and not in Washington or Ankara. Azerbaijan became rich because we are
there, the British expert claims. So, Aliyev will not find it easy to
reproach his partners or rather patrons.
From: Baghdasarian
- Igor Muradyan
- http://www.lragir.am/index.php/eng/0/politics/view/27879
- Monday, 29 October 2012, 13:35
Great Britain has played a major role in ensuring stability and security
in the South Caucasus and the Caspian Sea by launching oil and gas projects
there. Great Britain cannot allow damage and destruction of oil production
and transportation facilities where it has invested 35-40 billion dollars.
British Petroleum (like Total of France) is a foreign political instrument
for the British government which cannot ignore the interests of this
company. BP's sales are lower than the sales of major U.S. oil companies
which, despite being an important political resource for the United States,
do not have a big role in the foreign policy of the United States.
At the same time, British Petroleum is not just a foreign political
instrument but first of all a commercial organization interested in the
strategic security of its business. BP is a global company, has a huge
experience of work in many countries and regions, including in exploration,
and it is not a major problem to estimate the oil reserves in the Caspian
region.
Oil mines in Azeri-Chirag-Gyuneshli were thoroughly studied in the Soviet
period, in the 1970-80s, and estimated at 540 million tons, which was oil
in place by the time of signing the Contract of the Century. The contract
for the production of Azeri, Chirag and the deepwater Gyuneshli was signed
on 20 September 1994 and entered into force on 12 December. In addition,
BP-Amoco's share was 34.1367 % but this U.S.-British company is actually
the operator and conductor of this project.
Later the reserve of these mines was estimated at a proven 940 million tons
and a confirmed 1.03 billion tons. During extraction in the framework of
the Contract of the Century (taking consideration of estimates for 2012)
288.5 million tons or 53.5% of initially proven and 30.7% of confirmed oil
reserves was extracted. In 2009 40.3 million tons was extracted instead of
the planned 46.8 million tons, in 2010 the estimated amount was 42.1
million tons, extraction totaled 40.6 million tons, and in 2011 extraction
was 36 million tons despite the estimate of 40.2 million tons. By the end
of 2012 33 million tons will be extracted though 35.6 million tons has been
planned.
The Azerbaijani side first explained decline by extraction problems. It
made allegations against BP without coming up with substantiated claims to
this company relating this issue. At the same time, judging by oil in place
and plans regarding decline in the extraction rate should not have been so
significant, and the rate of decline should have been less steep.
Apparently, the Azerbaijani leadership is taking precautions in case
decline of extraction is more significant as to lead to cardinal change in
the economic, social and political situation in Azerbaijan.
It is also necessary to take into consideration that despite fluctuations
the oil price is expected to continue to drop which, together with a
drastic decline in extraction, will end up in a catastrophe for Azerbaijan.
The launch of extraction and export of natural gas will mitigate the
consequences but gas is not oil in neither an economic, nor a political
sense.
In this situation doubts occur that from the very beginning of
implementation of the project the oil reserves were exaggerated, which is a
common practice among raw material companies for the purpose of boosting
capitalization of enterprise. Besides, despite efforts, it has been
impossible to reveal the rate of producible oil in these mines. Earlier the
rate of producible oil in the Caspian region did not exceed 60%.
Considering assessments by the coryphaei of geology in the Soviet Union
well-aware of the Caspian geology, the originally announced amount of 540
million tons or a little more was the real amount of producible oil. Hence,
over half of it has already been produced.
Assessments by British experts on energy hold that the amount of production
of oil may drop to 25 million tons. Ostensibly, if oil in place is about
250 million tons, its extraction will continue for 10 years or so. In this
case, the entire scheme of the political component of this project
including Baku-Tbilisi-Ceyhan will be destroyed. This pipeline will have to
be used to transport the oil of Kazakhstan which is mostly transported to
Chine or the Russian oil and in this case Russia may buy this oil pipeline.
Hence, running out of the Caspian oil at such a fast pace may lead to
political troubles, considering that Baku-Tbilisi-Ceyhan had first of all a
political nature and was therefore supported by the U.S. government. In
this regard, a strategy of prolonging the term of extraction was worked out
and it is possible that this strategy was drafted at the beginning of the
project. Earlier it had been supposed that the political leadership of
Azerbaijan is trying to save its oil for future generations but Baku's
current reaction defies any patriotic intention. The leader of Azerbaijan
aims at fast extraction of oil and gas to enrich himself, his family and
his clan in the shortest possible period.
Hence, the interests of the family ruling Azerbaijan contradict not only
BP's intentions but also the U.S. political interests, possibly also the
U.K.'s interests. It should be noted that from time to time BP has tried
certain initiatives on Azerbaijan's to lobby its interests. At the same
time, the company's representatives claimed that Azerbaijan is not an
important partner to make special efforts for its interests.
In 2005 certain timid efforts to lobby Baku's interests in European
organizations were made which ended up in a fiasco. There was an impression
that this fiasco was planned to demonstrate to Azerbaijan that these
efforts are futile and cannot lead to success. Some British experts think
the United Kingdom cannot afford to lobby Azerbaijan's interests because
it is not appropriate for a great power.
`The interests of the Aliyev family are appropriately represented in
London, which is sufficient.' The rookery of the ruling family is in London
and not in Washington or Ankara. Azerbaijan became rich because we are
there, the British expert claims. So, Aliyev will not find it easy to
reproach his partners or rather patrons.
From: Baghdasarian