Caspian Sea Agreement to Help Boost Energy Plans

Five Caspian Sea states reached a breakthrough agreement on sovereign rights to the sea, paving the way for new oil and gas plans after more than two decades of disputes.

The treaty ends a spat over whether the Caspian is a sea or a lake, granting it special legal status and clarifying the maritime boundaries of each surrounding country. It also allows each to lay pipelines offshore with consent only from the neighboring states affected, rather than from all Caspian Sea nations, Bloomberg reported.

“Many years of thorough work have culminated today in the signing of the Convention on the Legal Status of the Caspian Sea,” Kazakhstan President Nursultan Nazarbayev said on Sunday in the coastal city of Aktau, as broadcast by Rossiya 24 television.

Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan have tried to define the Caspian Sea’s legal status since the collapse of the Soviet Union, in order to divide up the waters and its natural resources for new drilling and pipelines.

The territorial disputes have prevented the exploration of at least 20 billion barrels of oil and more than 6.8 trillion cubic meters of gas, the US Energy Information Administration estimated in 2013.

While the treaty “will take us one step forward”, there remain “important issues” to be resolved, Iranian President Hassan Rouhani said on Sunday before the summit.

According to Eurasia Group analyst Zachary Witlin one issue is the distribution of rights to seabed oil and gas deposits.

“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,” Witlin said in a research note before the summit.

The new agreement states that the development of seabed reserves will be regulated by separate deals between Caspian nations, in line with international law. This essentially cements the current situation, since countries such as Kazakhstan and Russia already have bilateral accords on joint projects.

The five Caspian Sea nations already develop offshore oil and gas reserves that are located near enough to the coast not to be disputed. Projects in the northernmost waters—Kazakhstan’s giant Kashagan field and Russia’s Filanovsky and Korchagin deposits—are seen as sources of future oil-output growth for the countries.

The treaty will also remove a legal barrier to building a trans-Caspian gas pipeline from Turkmenistan to Europe, the Oxford Institute for Energy Studies said in July, adding that “political and strategic obstacles would remain”.