Caspian states look to settle maritime issues

Aug. 10 (UPI) -- With offshore reserves on the line, the Kremlin said Friday that the five littoral states to the Caspian Sea will sign off on legal issues next week.

Caspian littoral states -- Russia, Iran, Azerbaijan, Kazakhstan and Turkmenistan -- meet next week in Kazakhstan for a summit aimed at settling simmering disputes over maritime boundaries.

"The signing of the convention on the legal status of the Caspian Sea, the work on which was underway since 1996, will be the focus of the summit," a Kremlin statement published by Russian news agency Tass read.

The agreement holds significance for oil and gas developments for littoral states. Azerbaijan, Iran and Russia are among those states with rich territorial energy interests in a region that holds up to 200 billion barrels of recoverable oil reserves according to some estimates.

At odds are the boundary distributions. For outsiders, a declaration more than a decade old stated that "only Caspian Sea littoral countries are allowed to use the resources of the sea."

Settling the decades-old dispute could facilitate pipeline construction and resources development in the region, though some of the area's bloodiest post-Soviet conflicts, like the fight over Azerbaijan's Karabakh region, remain unresolved.

Describing it as a "tough neighborhood," a July report from S&P Global Platts said territorial issues have complicated regional pipeline volumes. The Baku-Tbilisi-Ceyhan pipeline, one of the longest in the world, is only about 60 percent full because commitments from Caspian suppliers have yet to materialize.

For natural gas, the Caspian dispute could impact plans to develop the Shah Deniz field offshore Azerbaijan. Heralded as BP's largest gas discovery when it was announced in 1999, the first phase of Shah Deniz started sending gas to Azerbaijan, Georgia and Turkey in 2006. The second phase will push gas through a network of pipelines dubbed the Southern Gas Corridor deep into southern Europe.

Meanwhile, the Kashagan oil field offshore Kazakhstan was declared a commercial prospect in 2002. Development, however, has been impeded by a series of issues with infrastructure in a complex reservoir environment.

The North Caspian Operating Co., the field's operator, said it was dedicated to reaching a design capacity of 370,000 barrels of oil per day at the earliest possible date.

Camilla Hagelund, a regional analyst for Verisk Maplecroft, said in comments emailed to UPI that littoral states might not want to accommodate competition from other producers, so the impact of any meaningful concessions on borders may be limited.

"The signing of a convention on the legal status of the Caspian Sea is a landmark event for the five littoral states," she said. "However, the immediate impact on energy projects in the region is likely to be limited."

Russian President Vladimir Putin heads to Kazakhstan on Sunday for the Caspian summit.