By Javier Blas in LondonOil executives and officials have for...

By Javier Blas in London
Oil executives and officials have for years dreamed of the riches held in the ­Caspian region.
The hydrocarbon reserves in countries from Kazakh stan to Turkmenistan have long been sought after by international oil companies seeking access to more resources.
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The nations in the Caspian are not only open to foreign investments but have also been seen as a way to improve the energy security of western countries by offering an alternative source from the politically unstable Middle East.
After years of setbacks, the region could see “a sizeable increase in production and exports”, the International Energy Agency says. But in a sober assessment of the region’s potential, it also warns that “there are major barriers to the development”.
In a draft copy of its flagship World Energy Outlook report, the IEA highlights challenges such as “the sheer scale of the investments needed”, the complexities of building pipelines crossing through several countries before reaching export markets, and technical and regulatory difficulties with some of the oil and gas projects.
“All these factors will combine to constrain, at least to some degree, the growth of supply of Caspian hydrocarbons,” says the draft report. The IEA says the region’s share in global oil exports by 2035 will hit 9 per cent, up from 6 per cent last year and “enough to meet almost all the projected import requirements of North America in 2035”.
The IEA declined to comment ahead of the official publication of the report next Tuesday.
The outlook will be scrutinised by international oil companies ranging from BP and Royal Dutch Shell to Total of France and Chevron of the US, which have invested billions of dollars in the region, as well as oil officials around the world.
In spite of the problems, the IEA says, the Caspian has “the potential to make a significant contribution to ensuring [global] energy security”, by reducing the need to develop other, more expensive, sources of hydrocarbons and by increasing the diversity of the sources of oil and gas supplies in importing regions.
It forecasts that the region’s oil production will peak at about 5.4m barrels a day between 2025 and 2030, up from 2.9m b/d in 2009. Kazakhstan, home of the supergiant fields Kashagan and Tengiz, will be the main driver of oil production: it will “join the small elite” of countries with output of more than 2m b/d in 2015 and will become one of the top 10 oil producers in the world in 2020.

“As a result, Kazakhstan emerges as the fourth most important producing [nation] in the world in terms of additional oil production,” says the draft.
But the IEA also warns of delays, particularly on the mammoth Kashagan field. In the draft, the agency says first production will start in late 2013, one year behind the current schedule. The second phase of the project, which is led by Eni of Italy, will be delayed until 2019, three years later than currently envisaged.
In spite of the potential difficulties, the IEA says, gas production will jump, rising to 313bn cubic metres in 2035, up from 156bn cm last year.
While it is Kazakhstan that makes the big contribution to Caspian oil output growth, in natural gas that role is played by Turkmenistan, which will become, from 2015, one of the 10 largest gas producers in the world.
The IEA warns that Russia could stifle the development of the Caspian’s natural gas exports as Moscow has few incentives “to facilitate Caspian countries’ direct access to international markets”, where they could compete with Moscow supplies.
“Russia control over central Asia gas flows deprives Eurasia of an important element of market diversity,” says the draft.
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