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The Myth of Caspian oil.

Since 9/11/01, hundreds of articles have appeared referring to "the Caspian Sea's vast oil reserves." Yet these "vast reserves" are nothing more than a myth created by the US Geological Service (USGS) and the Energy Information Agency (EIA). Until the end of World War II, the Caspian was the Soviet Union's main oil producing region. Later, Soviet production moved to the Vulga and then to Western Siberia Oil production in the Caspian had become too difficult and too expensive.

After the OPEC oil shock of the 1970s, the US began a search for alternate petroleum sources around the world; a re-exploration of the Caspian was a part of this search. Even before the breakup of the Soviet Union a team led by the USGS' Dr. Harry E. Cook was in Kazakhstan and Kyrgyzstan. As a result, it was determined that substantial untapped oil reserves might exist in Kazakhstan. Atter the fall of the Soviet Union, several consortiums of Western oil corporations (Exxon Mobil, Phillips, Royal Dutch Shell, and others) entered the Caspian in order to expand exploratory drilling. By 2000, it was announced that significant reserves might exist, although this was not vet confirmed. Eventually the discovery of two "giant" fields in Kazakhstan was made public: Tenzig, in the south, and Kashagan, in the north. Speculation ran wild.

Actually, the existence of probable reserves as high as 200 billion barrels (bbl) had been announced by the USGS in the late 1990s, before exploratory drilling had taken place. This prediction, if true, would have made the Caspian one of the world's most significant oil production regions, equal to or more important than Iraq. On the other hand, important think tanks, as well as the Wall Street Journal and Time Magazine sharply disagreed with the USGS estimates. The USGS' figures were based on a controversial statistical method which differed from that generally used in the oil indastry, and which gave a great deal of leeway for expanded production based on not yet existing future technologies and other such factors. Reports from the EIA tended to follow those of the USGS. It is on the basis of these speculative projections that the notion of "vast untapped Caspian Sea oil reserves" came to be accepted by the public. Not taken into account was the fact that both agencies had other than scientific reasons for reporting high probable reserves in the Caspian. This bureaucratic aspect is interesting.

As government agencies. the USGS and the EIA were subject to two non-geological pressures: (1) the need of the US to build a production buffer between Russian oil and the Middle East, and (2) to show that the world's oil supply would be able to match projected sharply increasing demand. A Caspian oil myth answered both needs. There was only one problem: once actual drilling in the region began, it was discovered that the "vast reserves" did not exist.

Estimates within the oil industry quickly dropped to somewhere between 35 and 10 bbl (although the EIA still holds to a possible figure of 233 bbl). By 2003, Western corporations were cutting back or leaving the Caspian entirely. The Caspian myth had shattered on the rock of reality. In March, 2003 the United States invaded Iraq.

Note. This is a synopsis of the full article, which appears with documentation at

Patrick Eytchison, Eureka Greens
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Thinking Economically
Author:Eytchison, Patrick
Geographic Code:4EXRU
Date:Sep 22, 2003
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