Oil Market in The Azerbaijan Republic Essay Example | Topics and Well Written Essays - 2000 words

Oil Market in The Azerbaijan Republic - Essay ExampleIt also contains the worlds largest deposits of natural gas (Energy instruction Administration 2008).The withdrawal of the former Soviet Union has sop uped much of the worlds interests in the huge cover and gas reserves of the Caspian ocean region. The newly independent countries have signed many contracts worth billions of dollars to develop the regions oil and gas fields. The Caspian Sea has the potential to become one of the major oil and gas production areas in the world standardized in its capacity to the North Sea and the Gulf of Mexico (Energy Information Administration 2008).During World War II, Azerbaijans oil production peaked at about 500,000 set per day ( barrelful/d). Oil extracted from Azerbaijan constituted 71.4% of overall oil output of former Soviet Union. Following the war, the former Soviet Union directed resources elsewhere cause Azerbaijans oil production to drop dramatically. In 1991, Azerbaijan gained i ts independence from the former Soviet Union and oil production was at a minimum low of 180,000 bbl/d (Energy Information Administration 2008).The ability of Azerbaijan to develop its oil and natural gas resources was dependent on the availability of sources of capital and technology. Since then, Azerbaijan officials have been trying to attract foreign investments into their oil and gas industry. Azerbaijans has 1.2 billion barrels of proven oil reserves in addition to enormous possible reserves in the Caspian Sea. These oil reserves in addition to successful governmental policies have attracted foreign international investment to Azerbaijan. Since 1996, over $3.4 billion has been invested in the oil sector with expectations to tump over $2 billion in 2006. Ever since, Azerbaijans oil industry experienced a boom reaching almost 800,000 bbl/d in 2007. a great deal growth is still anticipated during the 21st century. It is expected that by 2010, Azerbaijans oil production would exce ed 1.5 million bbl/d (www.stat.gov.az, 2006).New fields in the Caspian Sea were developed by means of joint ventures (JVs) and production sharing agreements (PSAs). JVs were later converted to PSAs in 2000, due to their restrictions on the ability to export their oil (Energy Information Administration 2008).The Caspian Sea has 30 billion tons of oil, 18-20 trillion cubic meters of gas, which comprises 15 percent of the world carbon-hydrogen resources. The oil deposit that belongs to Azerbaijan 3-5 billion tons of oil, 5 trillion cubic meters of gas the oil production in Azerbaijan is expected to increase rapidly (SOCAR, 2008).. Azerbaijan carries most of its oil products from the Caspian Sea to the European market through the following four major pipelines Baku-Tbilisi-Ceyhan (BTC), Baku-Novorossiysk, Baku-Supsa, and Caspian Pipeline Consortium (CPC) as shown in figure 1 (Energy Information Administration, 2008).Figure 1 Four Major Pipelines of AzerbaijanThe Caspian Sea is also ric h with natural gas. The largest natural gas field in Azerbaijan is Shah Deniz. Azerbaijan is planning to supply natural gas to Turkey and European countries through the victimisation of South Caucasus Pipeline (SCP) (SOCAR, 2008). The former Soviet Union lacked of environmental protection has caused heavy environmental damages to Azerbaijan and the Caspian Sea. Mismanagement of the oil industry has generated much pollution and alteration of the natural environment of Caspian Sea region. Furthermore, oil and