From: mtaghavi@magnus.acs.ohio-state.edu (Amir Taghavi)
Newsgroups: soc.culture.iranian
Subject: Oil and gas reserves lure Western investors
Date: 27 Dec 92 17:03:46 GMT
Article-I.D.: magnus.1992Dec27.170346.20279
Organization: The Ohio State University


	BAKU, Azerbaijan (UPI) -- In Surakhany, a village not far from the
Azerbaijani capital of Baku, there is a temple with an eternal flame. It
was built by Zoroastrian fire-worshippers from northern Iran, drawn to
Surakhany by the gas jets that spring in burning flames from its soil.
	Now more foreigners are coming to Azerbaijan, lured by the vast oil
and gas reserves that gave rise to those unearthly jets and turned Baku
into the Soviet Union's pre-war petrochemical capital.
	In recent months, dozens of Western oil companies have returned to
Baku, eager to develop Azerbaijan's untapped oil fields.
	Since the 1870s, when the Nobels and Rothschilds started commercial
drilling on the Caspian Sea's oil-rich eastern shore, Baku has been a
center of oil extraction and refining.
	Azerbaijan's leaders now hope Western companies can open up their oil
industry again and reverse a sad legacy of underinvestment and long-term
neglect by the Soviet authorities.
	``We are currently producing 11 million tons of oil (or about 77
million barrels) a year but expect to see production rise to 25-30
million tons by the year 2000,'' says Sabit Bagirov of the Azerbaijani
state oil and gas company, Azerineftkhimya.
	That is no oilman's exaggeration. The Azerbaijanis, or Azeris as
they're often called, have been talking to a number of international
companies about developing fields with a proven capacity of up to 1
billion tons of oil, or about 7 billion barrels.
	Amoco Corp., based in Chicago, heads a five-company consortium that
won the first international tender in June 1991 and has just completed a
feasability study on developing the 1.75 billion barrel Azeri field on
the Caspian shelf.
	Then Pennzoil of Houston and Ramco, an Aberdeen, Scotland, company,
were given the green light to explore the Guneshli field, an onshore
site which already is producing 130,000 barrels a day and said to have
1.2 billion barrels still in place.
	Apache, a Denver company, is negotiating rights to develop the
offshore Kepes field, which has reserves estimated at 200 million to 400
million barrels.
	Finally, British Petroleum and the state-owned Norwegian company
Statoil last September got the go-ahead from the Azeris to survey the
Chirag (flame) field, which reportedly has reserves of 1.2 billion
barrels.
	For decades, fields like Azeri and Chirag remained untapped,
casualties of an industry ill-equipped for deep-water drilling.
	The drift of resources away from Azerbaijan accelerated in the 1950s,
when the Soviets struck oil in Siberia. Baku lost its preeminence as the
hub of the Soviet oil industry: production fell from 21.5 million tons
in 1965, or 8.9 percent of Soviet total production, to 3.7 million ton
1988, or 0.6 percent of the total.
	But as the Soviet Union fell apart, Azeri leaders looked elsewhere
for the investment they needed. In Azerbaijan, political freedom was
always identified with economic independence -- the right to dispose of
one's own resources free of Moscow's meddling. Nowhere was this more
obvious than in the oil industry.
	Baku is making sure it is not exploited again. Foreign companies are
paying for the right to negotiate. No contracts and no extraction rights
have been awarded so far. For these companies, the risk is huge and the
potential rewards enormous.
	But exploitation is not the only demon Azerbaijan wants to exorcise
from its past. The other is waste.
	The Azeris have been looking into ways of harnessing their natural
gas. For years, much of the gas has simply been ``vented'' -- allowed to
escape into the atmosphere like the gas jets at Surakhany.
	The republic produces 9 billion cubic meters of gas annually and an
estimated 2 billion cubic meters is vented every year in the Caspian
Sea, causing serious but invisible damage to the environment.
	Azneftkhimya and Pennzoil signed a deal in October on a gas
utilization project that will see gas from the Guneshli field gathered,
compressed and transported to the mainland to be processed.
	Increased natural-gas production makes sense in Azerbaijan. The
country currently imports most of its gas from the former Soviet
republic of Turkmenistan across the Caspian Sea. But the Turkmens
recently doubled their gas prices, forcing Azerbaijan to look elsewhere.
	Since gas is a much cheaper energy source than the fuel oil now
burned in Azerbaijan's power plants, Azneftkhimya hopes that by
switching to gas-fired plants Azerbaijan can free up more oil for
export.
	But Azerbaijan's plans for expansion of oil exports are hampered by
an absence of export pipelines. A consortium made up of Russia,
Azerbaijan, Kazakhstan and Oman is being put together to build a
pipeline from Kazakhstan and Azerbaijan to proposed terminals on the
Persian Gulf, the Mediterranean, or the Black Sea. But this will not be
ready for years.
	Still, the recent progress in talks with foreign companies has been
remarkable. The successes have been attributed to Popular Front leader
Abulfaz Elchibey, whose landslide victory in the presidential elections
in June helped end a long period of social unrest and political
isolation.
	Buoyed by its new-found popularity in the West, Azerbaijan wants to
sever its last remaining ties with Russia's ailing economy. It already
has introduced its own currency, the manat, and now wants out of the
post-Soviet ruble zone.
	``We are still not completely independent in our choice of economic
policy,'' says Sabit Bagirov of Azneftkhimya. ``We need to get out of
the ruble zone so we can carry out our own monetary and financial
policy. This is the basis of independence.''
	To protect its industries from the ravages of Russian inflation and
the relentless devaluation of the ruble, Azerbaijan wants to switch
completely to the manat and conduct all trade with the former Soviet
republics in hard currency based on world prices for oil and all other
goods.
	The government in Baku sees that as the only road to real recovery.
	Azerbaijan's neighbors will balk at paying world prices for Azeri
oil. But there are plenty of people who won't.
	The government is banking on oil exports buying economic revival. And
for a country paying 30 million rubles a day for a war with its neighbor
Armenia, a strong economy is not an idle luxury. It is a matter of life
and death.


"Copyright 1992 by <UPI/Newsbytes>
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Newsgroups: soc.culture.iranian