WHEN petroleum geologists sleep, they dream of elephants - not pachyderms but giant oil fields, the kind that can rival those of the Middle East.
The huge multinational oil companies must settle for far smaller finds these days, but they always hope to find an elephant. And most geologists agree that if any undiscovered elephants exist, they are most likely to be found in the former Soviet Union.
Russia still remains the second largest oil producer in the world after Saudi Arabia. And Western Siberia, the main center of Russian oil production, is attracting the interest of Western oil firms from the majors to smaller companies.
But "most of their attentions are directed south," says George Reese, an oil expert and head of Ernst & Young's consulting operations in the former Soviet Union. "South" means the oil and gas fields on and off the shores of the Caspian Sea, lying mainly in the former Soviet republics of Kazakhstan, Turkmenistan, and Azerbaijan. "There's the potential for elephants down in this area," Mr. Reese says.
One "elephant" has already been snared by the Chevron Company - the Tenghiz and Korolev oil deposits in Kazakhstan on the northeast coast of the Caspian Sea.
The Tenghiz oil reserves are estimated at 35 billion barrels, according to the official Russian Itar-Tass news agency, making it one of the 10 largest fields in the world. Chevron, in a joint venture with the Kazakhstan government, signed a deal in April for a 40-year development of that field.
Across the sea, off the shores of Azerbaijan, a consortium of Western firms is poised to develop a group of three deposits estimated to hold 4 billion barrels of oil. The contract between the Azerbaijan State Oil Company (SOCAR) and the consortium of British Petroleum/Statoil, Amoco Corporation, Pennzoil Co., Unocal Corporation, McDermott International Inc., and the Turkish Petroleum Corporation was due to be signed last month. But it has been postponed because of the political turmoil in the Caucasus re public.
The Azeri fields are among the oldest in the world, exploited since 1871. At the turn of the century, they were the largest in the world. One of the world's first pipelines was built at that time, constructed out of wood and running from Baku in Azerbaijan to the Black Sea. The pipeline was designed by Alfred Nobel who made his fortune there. Prospects uncertain and unlimited
But after World War II, the fields went into decline in favor of those in Russia. Both Western and Azeri officials say that even larger deposits than those already surveyed remain to be found under the bottom of the Caspian Sea.
"The rest of the Caspian Sea that belongs to Azerbaijan is also rich with perspective oil structures, but not explored yet," Sabit Bagirov, who headed SOCAR until the recent political changes in Azerbaijan, told the Monitor in an interview in Baku last fall.
Turkmenistan, the world's fourth largest natural gas producer, is also thought to have major oil potential on its Caspian shores where some smaller oil and gas fields are now operating. Mr. Bagirov shares the Western companies' view that the entire Caspian Sea basin is filled with oil fields. "There are oil structures on all of the bottom of the Caspian Sea," he says.
The biggest problem for tapping the potential oil bonanza of the Caspian Sea may not lie in finding the black gold but in getting it out.
The governments of the region and their Western partners are now pondering a variety of routes for export pipelines, each of which poses a different set of geopolitical, technical, and ecological problems. Each option under consideration crosses territories embroiled in wars and political unrest, the aftermath of the collapse of the Soviet Union.
According to a report prepared for SOCAR by Morgan Grenfell and obtained by the Monitor, there are three routes for export of Azerbaijan oil presently being considered. Oil from Kazakhstan and Turkmenistan could also feed into this system, via a pipeline across the Caspian Sea, experts say.
Two of the routes lead to the Black Sea - one of them via Georgia to the Black Sea port of Poti, the other to the Russian Black Sea port of Novorossysk via the North Caucuses oil center Grozny. The third route passes through Iran to Turkey where it links up with the existing two-line pipeline from Iraq to the Ceyhan on the Mediterranean coast of Turkey.
For the oil companies, the rule of thumb usually is that the more countries a pipeline passes through, "the more difficult it would be," Reese says. From that point of view, the Black Sea routes are preferable as each passes through only two countries. The Georgia pipeline option is the shortest - only 795 kilometers long compared to 1,300 kilometers going through Russia.
But both routes go through areas plagued by political unrest. Georgia is riven by a civil war in the Black Sea region of Abkhazia. The Russian pipeline would pass through Grozny, capital of the autonomous republic of Chechenya, which has declared independence from Russian control.
Aside from these political problems, the Black Sea poses some unique navigational and environmental obstacles, the report states. Ships will have to pass through the narrow Bosporus Straits and the Dardanelles to get out into the Mediterranean, both of them difficult navigational paths. "It is physically impossible for large tankers to pass the straits," the report says. Currently, only one or two large ships move through the straits a day, whereas the export of oil from Azerbaijan and Kazakhstan would r equire an additional six ships a day.
The Turkish government has already indicated its opposition to such an increase in traffic. "Their attitude to an increase in ship movements is unlikely to be favorable, particularly if a Black Sea pipeline route is selected in preference to a Turkish Mediterranean alternative," the Morgan Grenfell report concludes.
"According to many objective estimates, we are inclined to exit into the Mediterranean," said SOCAR's Bagirov. For the Azerbaijani and Kazakh governments, the Iran-Turkey route has the additional attraction of allowing them to escape from their dependency on Russia. Getting oil through Iran
Western oil companies are nervous about running a pipeline through Iranian territory. That view is also shared by some in Turkey which has its own difficulties with the fundamentalist regime in Tehran. Indeed Turkish officials are interested in a fourth option - running the pipeline through Armenia into Turkey. But that requires an end to the Armenia-Azerbaijan war, a war in which Turkey has sided with its Turkish-speaking "brothers" in Azerbaijan.
"The main thing everyone is nervous about is not having alternatives," Reese says. He says the oil companies and the governments themselves might ultimately opt for both a Mediterranean and a Russian route. As for the latter, it will take five years to build the pipeline, he points out.
"What is the political situation going to be then, which countries are these new southern states likely to have an easier time getting along with - each other or Russia?" he asks. "There's a good possibility that five years from now, Russia may be the politically correct solution."