The Caspian Sea, located between south-eastern Europe and Asia, is bordered by Russia, Azerbaijan, Iran, Turkmenistan, Kazakhstan, and whilst historically it has been a region for producing crude oil, the future looks more likely to be dominated by natural gas production.
Last year, according to an Energy Information Administration (EIA) report, the Caspian Sea accounted for 3.4 percent of the world's oil production, but since 2006, Azerbaijan and Kazakhstan have led expansion projects in the development of natural gas production in the area, enabling all coastal countries on the sea to extract a total of 2.5 trillion cubic feet of natural gas in 2011, up from 1.25 trillion cubic feet in 2000.
The Caspian Sea. (EIA)
The EIA estimates that the Caspian Sea region holds nearly 48 billion barrels of oil and 292 trillion cubic feet of natural gas, and each of the coastal countries has announced discoveries of large natural gas fields, suggesting that natural gas will soon become the main form of hydrocarbon exported from the region.
Related article: Georgia Seeks Expanded Role as Caspian Energy Corridor
Many of the countries around the Caspian Sea were under the rule of the Soviet Union for decades, but having been awarded their independence, built export infrastructure to send the crude oil they were producing out into global markets.
Fuel Fix explains that the shift from supplying the local markets to global markets increased demand for Caspian resources, drawing more attention to the area from state-owned and international oil and gas companies. Although due to the number of countries that share the coast of the Caspian Sea, territorial and legal disputes have been numerous, making foreign investment very difficult to secure.
Last year the EIA stated that the Caspian Sea held the world's seventh largest undiscovered reserves of oil and natural gas, with around 20 billion barrels of undiscovered oil and 243 trillion cubic feet of undiscovered natural gas.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com More