Guest Post: Will Central Asia Replace The Middle East As Prime Oil Source?
Submitted by Claude Salhani via OilPrice.com,
One of the prime reasons why the Middle East holds such importance to the West is partiality because it is the main supplier of oil and natural gas to countries in the West. Over the past several decades Western countries had few, if any, options other than to purchase its oil and gas from Middle Eastern oil producing nations despite the headaches that came with it. Headaches, for example, that’s included political unrest, turmoil and strife.
But now with the newly found fields of oil and gas in Central Asian countries such as Kazakhstan and more recently Turkmenistan, as well as the oil from Azerbaijan are only the beginning of what may lie in these vast oil fields of the steppes and the Caucuses.
But the Middle East comes with more than its fair share of problems. Wars, uprising, conflicts, civil wars, kidnapping and a rising anti-Americanism in the region makes it indeed very difficult to conduct business as usual, where there seems to be perpetual strife in some part of the region at any given moment. Such as:
Iran: As one of the top oil producers in the world, the Islamic Republic could face setbacks if its facilities are hampered in any way. This could come as a direct result of an Israeli preemptive strike on Iran’s nuclear facilities, or as a result of an Iranian retaliatory attack on Israeli and/or US interests or targets in the region. For example, once Israel attacks Iran, the Islamic Republic could retaliate via it proxy militia Hezbollah – now with real combat experience gained in Syria. That in turn, would bring about more retaliation and counter retaliation. Eventually, either the oil facilities or lines of transportation would be affected.
Based on an interview Israeli Prime Minister Benyamin Netanyahu gave CBS News earlier this week, that Iran is on track to becoming a nuclear power within the next two weeks and that in so doing would be crossing the imaginary red line that US President Barack Obama has established. Netanyahu also stated that Israel could not allow Iran to have nuclear weapons.
Iraq: Is another major oil produced in the Middle East and another country troubled by internal strife. Continued suicide bombings and attacks against government facilities makes it difficult to conduct normal business. Add to that the contention between the Shiites, the Sunnis and the Kurds and the problems in the country are further amplified.
The recently discovered oil and gas fields off the costs of Lebanon and Israel are vast enough to provide a decent return to the two countries, both badly in need of cold, hard cash. Bringing those wells online however might be delayed due to the political situation in the region.
Now consider the alternative to Middle East oil: Central Asian oil.
As the Arab countries continues to struggle through wars and conflicts consider the alternative; the countries that once were part of the Soviet Union are now making advances in leaps and bounds into the foray of Western styled free market economies thanks to a vibrant, growing and promising petrochemical industry.
One example is how oil production form Turkmenistan helped push production up 15 percent for Dubai energy company Dragon Oil, its chief executive said Tuesday.
Dragon, which focuses on Caspian exploration, said its daily production during the first half of the year reached 73,600 barrels of oil per day, a 15 percent increase year-on-year.
Chief Executive Officer Abdul Jaleel al-Khalifa said he was "pleased to report solid production" during the first half of the year.
The company said it attributed the increase to production activity in Turkmenistan, where it has six wells completed as of Tuesday. All of its oil is exported through Azerbaijan. It said the average rate of production from new and existing wells has maintained a level about a base December rate of 73,500 bpd.
The Caspian region is expected to play a major role in European ambitions to add more diversity to an energy market dominated by Russian suppliers.
"We maintain our medium-term guidance over the 2012-15 period of average gross production growth of 10 percent to 15 percent per annum, taking our gross field production to the target level of 100,000 bpd in 2015 and maintaining this plateau for a minimum period of five years," the company said.
The other Central Asian energy giant, Kazakhstan, has reached a production level of 1.6 billion million barrels per day in 2011. Exports are at 1.078 million per day.
But will the Arab world see the handwriting on the wall before it’s too late? That question remains to be answered.
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