Economics and politics of cross-border oil pipelines—the case of the Caspian basin
Authors: Raballand, Gaël; Esen, Ferhat
Source: Asia Europe Journal, Volume 5, Number 1, March 2007 , pp. 133-146(14)
Abstract:The construction of cross-border pipelines requires large upfront investment and, because of transit through third countries, is subject to increased risk. We demonstrate that the decision to build cross-border pipelines in landlocked regions is influenced more by economics than by politics. Governments use transportation constraints to discriminate among foreign oil companies and to promote low-efficiency routes for political purposes. This paper describes strategies used by importers and oil majors to address this limitation, using the Caspian basin as a reference. Based on data obtained from oil professionals operating in the region, and professional journals, we highlight that, on average, transportation costs in the Caspian basin are up to six times higher than in the other oil-producing regions of the world.
Document Type: Research article
Publication date: 2007-03-01