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Whether Caspian oil and gas production will justify multiple export routes and when that might happen have been central strategic issues in the development of this hydrocarbon province.
Considerations for all sides are crucial, but in at least one case they do not conflict: Host governments among the Caspian producing nations, multinational companies operating in the region, and consuming countries that are providing much of the crucial capital and technology all can benefit from strategic alternatives that neutralize commodity price risk.
Differences arise from the power politics underlying particularized interests. Access to diverse pipeline export options that offset regional geopolitics and dilute producer market power may benefit one party but injure another.
The influence, both external and internal, exerted in favor of or against various proposed alignments constitutes the historic conundrum for the region: The great games that have played out continuously over time as control over resource wealth and trade routes is sought.
Today, roughly 18 months after the depths of the last oil price collapse, two things have become immensely clear, if they were not already.
* A world in which real oil prices are perceived to be consistently low over a critical planning horizon is not one that can easily support multiple oil-export-pipeline routes. Isolated from the best markets by great distances and difficult terrain, trapped by complex geopolitical intrigue and very real security issues, the Caspian becomes, in this scenario, one of the most remote of hydrocarbon provinces.
There are limited options that can be supported. The best positioned pipeline projects in terms of fundamental economics, reserve base, and financial backing are first in line.
Alternative routes will be developed only as they can be supported given the constraints present in a low oil-price case. We, and other analysts, have demonstrated this reasoning (OGJ, Apr. 19, 1999, p. 29).
* But a world in which real oil prices are perceived to be consistently high over a critical planning horizon presents quite a different story. In this case, the Caspian becomes less remote and more essential to the world energy balance (OGJ, June 12, 2000, p. 76).
A rationale can develop for surplus transportation capacity in the region, and Caspian "pipeline politics" can take new strategic twists.
There exists at present an opportunity to observe what a higher oil-price case might mean for the region. However, clearly, there are dozens if not hundreds of caveats at play in either case.
Determined efforts can move less attractive pipeline projects, in economic terms, to the front of the list if they satisfy critical strategic interests. The current high prices for oil can easily slump if demand slackens and excess supplies develop.
And while oil prices bear some influence on the natural gas transportation picture for the Caspian, the residual constraints for gas transportation options become much more evident at the …