Unleashing the Caspian’s potential in oil, gas and critical minerals

As the war in Iran pushes energy security ever higher on government agendas, importing countries want to diversify their sources of oil and gas. For IOCs and NOCs scanning the globe for upstream investments, resource holding countries are in pole position. Geopolitically stable contenders in the Caspian region include Azerbaijan, Kazakhstan and Turkmenistan. These producers have a great opportunity to collaborate and elevate the region to play a bigger role as a reliable supplier of energy and natural resources.   

Malcolm Forbes-Cable and Ian Simm from our Consulting team have spearheaded WoodMac’s engagement in the region, along with Craig Saunders from Upstream Research and, on occasion, me. They shared their thoughts on the prospects for future regional autonomy.   

Azerbaijan’s strategic position to access global markets.   

Azerbaijan not only ranks as a sizeable oil and gas producer in global terms but, importantly, is ahead of the game having invested in critical infrastructure to export its oil and gas from the landlocked Caspian Sea. Its upstream industry, more than a century old, rose to global significance early this millennium with the development of BP’s giant offshore ACG and Shah Deniz projects.   

These fields propelled total production to 1.2 million boe/d by 2010, with 80% of that oil. Output has held this level ever since, and on our forecasts will stay there through to the late 2030s helped by Phase 2 of TotalEnergies’ Absheron gas project which FID’d last month. Gas has become the growth story, comprising about 60% of production in 2026.   

The NOC SOCAR is a significant investor in all upstream projects. The government is also aiming to attract more investment offshore as well as onshore where ExxonMobil has a licence to explore a large unproven shale play. Azerbaijan’s refining capacity is focused on meeting domestic fuel demand.   

The construction of major export pipelines opened the ‘Southern Corridor,’ connecting Azerbaijan’s oil and gas supplies to wider markets beyond the Caspian. The 1.2 million b/d BTC oil pipeline (2005) transports mainly Azerbaijani crude to the Mediterranean port of Ceyhan. Even topped up with volumes shipped across the Caspian from Turkmenistan and Kazakhstan, BTC is substantially underutilised. The TANAP (2018) and TAP (2020) gas pipelines carry Azerbaijani gas through Georgia and Turkey and on to the European gas network via Greece and Italy.   

New pipeline connectivity – the ‘Middle Corridor’  

Energy connectivity and diversification of export routes were big themes last week at the KIOGE conference in Almaty, Kazakhstan. A possible East-West ‘Green Corridor’ linking renewable power supply to Azerbaijan via an interconnector across the Caspian Sea was much discussed.   

It is future oil and gas connectivity, however, that could be game changing for the region. NOC KazMunaiGas is the biggest resource holder in Kazakhstan, but the scale of resources has attracted IOC investors for decades. Key players include Chevron, ExxonMobil, Eni, Shell, TotalEnergies, CNPC, Lukoil and Inpex. Kazakhstan currently produces 2.2 million b/d of liquids, with over 1.5 million b/d exported through the CPC pipeline to a port near Novorossiysk on Russia’s Black Sea coast. Flows have, however, been seriously disrupted by attacks on the pipeline and port facilities related to the Russia/Ukraine war. There is potential to lift export volumes by more than 0.2 million b/d if the next phase of the giant Kashagan project goes ahead.  

Turkmenistan’s situation as a substantial gas producer is different. The giant Galkynysh is the second largest gas field in the world, with exports contributing up to a third of the country’s GDP. The exports, 34Bcm/year sold exclusively to China, are well below half of Qatar’s larger North field gas exports in 2025. While the two countries have discussed additional sales there’s been little progress. Turkmenistan needs to cultivate alternative export options if it is to commercialise Galkynysh’s vast reserves. The main gas producers in Turkmenistan are NOC Turkmengaz, CNPC, Petronas and XRG.  

A logical solution for the region is obvious – build new pipelines across the Caspian Sea to link Kazakhstan’s oil and Turkmenistan’s gas to the existing export routes through Azerbaijan to the Mediterranean and European gas network respectively. Filling in the missing links, cross-Caspian oil and gas pipelines, would complete the ‘Middle Corridor,’ a new Silk Road for molecules.   

The Middle Corridor would give Kazakhstan and Turkmenistan the export optionality they seek, allow them to accelerate investment in their resource, and boost the availability of supply and energy security importing countries need. Azerbaijan, meanwhile, would capture valuable tariff revenues, and strengthen its position as a strategic linchpin all along the corridor.  

Realisation of the concept is far from straight forward. Progress awaits answers to big questions, these three among them. How to gain support from multiple governments with varied, individual and vested interests, not only Azerbaijan, Kazakhstan and Turkmenistan but others not least Russia and China? Is Europe keen to commit to long-term gas contracts? And who finances the large-scale cross-border infrastructure – governments or the oil and gas industry?   

The Caspian – an emerging source of critical minerals  

Beyond oil and gas the Central Asian countries are rich in critical minerals. Efforts to attract foreign investment are ramping up as countries focus on developing their mining and processing industries to capitalise on the current dash for these vital resources. China’s insatiable appetite is an obvious market but the pull from the west has also surged with the recognition of the strategic importance of these resources. 

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