More on the Baku Bluff

A friend has passed along a fascinating speech I'd missed early this month by Bill Schrader, who runs BP's operations in Azerbaijan. In it, Schrader says that BP and its Big Oil partners in Baku can pump almost 70% more oil from their offshore Caspian fields there than they previously thought, or an increase of 3.6 billion barrels. The total now will be close to 9 billion barrels.

At a time of scarce positive news from the world's oilfields, Schrader doesn't imply the onset of a flood of new oil to the market. But he does mean that Baku's 1 million-barrel-a-day production will last longer -- it was thought that this peak would terminate in five years; now it can be extended for another six years, through 2019. With North Sea and Alaskan oil on the decline, that's a bit of a cushion. I don't have a link to the June 4 speech itself, but here is Platt's coverage if it.

Yet, for the O and G audience, I couldn't help shaking my head. You will recall that, back in the 1990s, when recalcitrant BP was under pressure from Washington and Azerbaijan to build a non-Russian pipeline from Baku to the Mediterranean, the company replied that it would love to, but that there simply wasn't enough oil.

Why, then-BP representative Terry Adams said again and again, there are just 4 billion barrels of oil offshore, and at least 6 billion would be necessary to economically warrant the proposed Baku-Ceyhan pipeline. That naturally was before BP discovered that it needed Washington's approval to buy Arco. Then BP said: Did we say we needed 6 billion barrels? We meant 5 billion! And what do you know? We have found another billion barrels offshore! How do you like that? So let's go ahead and build that pipeline! The 1,000-mile line went live two years ago, and ships a million barrels of oil a day to the world market.

There are multiple interpretations of that timely shift. My own is that both sides exaggerated -- Washington elevated the volume of oil in order to promote the region; the oil companies under-estimated, partly to get a better transit fee deal from Georgia and Turkey.

As for the current energy environment, the Shepherd speech I think informs the current panic-stricken atmosphere. All the information isn't necessarily out there.

Photo: CarbonNYC

Rights: Creative Commons