EU, Caspian, Black Sea States Plan Common Energy Market

ASTANA, Kazakhstan, November 30, 2006 (ENS) - A plan that paves the way for an integrated common energy market between the European Union and governments of the oil and gas rich Caspian and Black Sea regions was agreed today at a ministerial conference held in the Kazakh capital, Astana.

Known as an Energy Road Map, the plan was agreed by the European Commission and the governments of Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkey, Ukraine, Uzbekistan and the Russian Federation, as an observer.

“This conference has drawn the way towards closer energy integration of these regions of the world,” said European Energy Commissioner Andris Piebalgs.

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Pipeline carrying oil from Kazakhstan to a marine terminal near the Russian city of Novorossiysk on the Black Sea. (Photo courtesy Caspian Pipeline Consortium)
As European energy consumption rises, the Caspian Sea and Black Sea region is viewed as the last frontier of exploration.

The ministers announced their agreement following the second Energy Ministerial Conference of the Baku Initiative, a policy discussion on energy cooperation among the partner governments. The first such conference was held in Baku, Azerbaijan on November 13, 2004.

Implementation of the Energy Road Map will pave the way for a comprehensive legal and regulatory framework for an integrated common energy market among the partner governments.

The EU views such a common energy market as a means of diversifying its energy supplies.

Established as a new cooperation initiative, it is aiming at the progressive integration of the Black Sea and Caspian Sea region energy markets with the EU markets.

The participants in today's ministerial conference agreed on four priority areas for future energy cooperation - converging of energy markets; enhancing energy security; supporting sustainable energy development; including energy efficiency, renewable energy sources and demand side management; and attracting investment towards energy projects of common interest.

Piebalgs said such a process implies progressively converging energy policies on issues of trade, transit and environmental rules as well as standards.

All parties agreed to facilitate and mobilize private and public financial resources from partner countries, EU assistance and international financial institutions to support this process.

Piebalgs announced today that the European Union will sign two energy deals with Kazakhstan when President Nursultan Nazarbaev visits Brussels in early December.

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European Energy Commissioner Andris Piebalgs (Photo courtesy Office of the Commissioner)
Briefing reporters in Astana, Piebalgs said the first of those two documents explores possible energy supplies to the EU from Kazakhstan and investments in the Kazakh energy sector.

The other document, which the European Commission agreed to on October 24, would authorize cooperation in the peaceful use of nuclear energy.

Kazakhstan is the world's third-largest uranium producer, after Australia and Canada, but accounts for only three percent of uranium deliveries to EU nuclear facilities.

At a Baku Initiative transport ministers meeting in May, the governments agreed on development of a common security management system and cooperation in the area of maritime safety and ship pollution prevention for the Black Sea and the Caspian Sea at an initial cost in 2006 of 3.5 million euros.

The landlocked Caspian Sea is the largest inland body of water on Earth and it is surrounded by Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan. Discovery of significant hydrocarbon deposits in the region in the mid-1990s brought an influx of foreign investment in energy development, particularly in Azerbaijan and Kazakhstan.

The U.S. Energy Information Administration estimates that the Caspian could hold between 17 billion and 33 billion barrels of proven oil. Other experts estimate the Caspian could hold possible reserves of up to 233 billion barrels.

By comparison, Saudi Arabia has 261 billion barrels of oil and the United States 23 billion.

The five Caspian countries have an estimated 170.4 trillion cubic feet (4.83 trillion cubic meters) of proven natural gas reserves and possible reserves of 293 trillion cubic feet (8.30 trillion cubic meters).

Serious environmental problems have followed energy development in the region. Petrochemical and refining complexes on Azerbaijan's Absheron peninsula have polluted the land, and discharges and spills from oil and gas drilling, both onshore and in the sea, have taken an environmental toll.

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Oil production in Azerbaijan (Photo courtesy Goverment of Azerbaijan)
Oil and gas production in the sea and the construction of pipelines and infrastructure to export these resources, such as the Baku-Tbilisi-Ceyhan oil export pipeline completed in 2005, raises the possibility of accidental spills and environmental destruction.

Construction of the Baku-Tbilisi-Erzurum gas pipeline is nearing completion. The pipeline will transport gas from the Shahdeniz field to Turkey and then to the European markets.

Environmentalists fear that rising water levels of the Caspian Sea could flood oil wells, rigs, and reservoirs on the coastline, spilling into water tables and contaminating drinking water supplies.

Turkey's location makes it a natural conduit between oil producing areas in the Caspian Sea region and consumer markets in Europe. But Turkey's narrow Bosporus Straits are a shipping choke point between the Black and Mediterranean Seas.

With some 50,000 vessels annually, including 5,500 oil tankers, the Bosporus Straits are one of the world's busiest and most difficult to navigate waterways.

Increasing shipping traffic through the Bosporus has heightened fears of a major accident that could have environmental consequences and endanger the health of the 12 million residents of Istanbul that live on either side of the Straits.

The Caspian Pipeline Consortium, CPC, says it places environmental protection high on its priority list. The 1,510 kilometer main pipeline, completed in 2001, connects oil fields in western Kazakhstan with a new marine terminal near the Russian city of Novorossiysk on the Black Sea.

The consortium says emergency preparedness and response is a critical aspect of its daily activity. "CPC has a tiered response composed of our own volunteer brigades supported by local and regional professional response teams," the consortium says.

To view a list of all pipelines and export routes in the Black and Caspian Sea regions as of 2002 click here.