Saturday, August 25, 2012

TUM air force

The Caspian Sea has a problem of definition. What exactly makes a sea a sea? When does a sea become a lake? This matters because of how maritime boundaries are defined. Currently, the Caspian boundaries are under dispute. There used to be a clear line of sorts in the Soviet era. The border was simply between the Soviet Union and Iran and the Soviet Union had the power to define the terms more unilaterally. Now, five countries border the Caspian and they do not agree on which parts belong to which country. And what does any of this have to do with the Turkmenistan Air Force? Lots. Maybe.

The Air Force has been flying their Balkanabat-based planes several times in the past several weeks. They have a handful of Sukhoi Su-25 aircraft based here. Why have they been flying these planes? Well, the weather has been good so perhaps they are taking photos of the countryside. Alternatively, some combination of training and a show-of-force exercise. After looking at a map, it should not be shocking that Azerbaijan and Turkmenistan dispute the portion of the Caspian that is between their two countries. Furthermore, there is an oil and gas operator that wishes to drill in a block that is in this disputed zone. This company was trying to conduct seismic operations there in the past couple months, but they ran into some problems with getting their work completed. This is hardly the first time some force or implied force has been used when it comes to oil and gas activity in the Caspian.

The uncertainty is bad for business. This operator needs to tender and solicit bids for services for the work they wish to perform. We are working on such a bid. That's not private or surprising information. We bid on almost anything possible that is related to our business. If an operator says they plan to drill a well, providing services for that is the business we are in so we will of course submit a bid. Perhaps there are cases where we may submit a bid, but then withdraw the bid or not really want to perform the work if the risks are too great or the legal climate is too uncertain. Nonetheless, a bid would still be prepared. But such a bid in this case needs to take into account the risk premium for being in a disputed area and the potentially uncertain and non-guaranteed security situation. These things push prices a certain direction and I can give you the hint that uncertainty and risk do not lead to lower prices. This is ultimately bad for the industry in the long-term because it raises the cost of doing business. This is where a stable and secure geopolitical climate, something that is very much taken for granted in the U.S., becomes incredibly important out here. The uncertainty here leads to me being able to hear from my office military planes flying around outside.

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