ABSTRACT

Ask an oil executive about investing in Central Asia and his or her response will focus on two issues: the giant oilfields there and the considerable political risk involved in developing the fields profitably. Since 1992, the oil industry has made considerable progress in the area by increasing production and developing access to markets. However, development has been slower than anticipated and early expectations of a thriving oil and gas industry to rival the Middle East have largely evaporated. The notable successes of building the Caspian Pipeline Consortium (CPC) oil pipeline from Kazakhstan to the Black Sea and increasing oil production might lead people into thinking that political risk in the area has reduced significantly. While the nature of the political risk has undoubtedly changed it will certainly continue to exist for oil companies over the next few decades.