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Caspian riches to reach the poor?

Roughly the size of Scotland, the Republic of Kalmykia in Russia’s south has a population of just 300,000 people. Traditionally nomads, they are used to living off the land. But this small region is rich in oil and gas and many Kalmyks are hoping that a better future will be provided by these resources.

For centuries the Caspian Sea has been the lifeblood of eastern Kalmykia. It also has a diverse agricultural sector as well as food processing. Farming is the biggest industry, but Kalmykia was hard hit by the collapse of Soviet Union and now it’s one of Russia’s poorest republics. Once home to a thriving wool industry, the equipment and methods are now outdated.

“I spend all day, everyday, with sheep. I have to keep an eye out for wolves. They’re a real problem as they kill so many of our animals, and we just can’t afford it,” says shepherd Igor Khamurov.

The old ways are changing, however.

Kalmykia is a land ripe for further development and about 30km away from the border exploratory drilling has already begun at the Laganskaya 2 platform.

Initial estimates point to potentially huge reserves of oil and gas, lying deep beneath the bed of this southerly part of the Caspian. Oil reserves of anywhere between 15 and 60 million tonnes per year have been predicted.

Together with international partners, Russia’s Lukoil and Gazprom are also at work on several fields. The plan is to eventually build new pipelines along the sea bed, together with storage and refinery plants on land. Drilling within the steppes themselves is underway, and the first stage of a wind farm, big enough to supply the region with electricity, is due for completion next year.

It’s good news for a republic with some 70 per cent unemployment, but there’s just one problem.

“Lukoil needs 1,500 workers, but in Kalmykia people just aren’t trained to do this kind of job. So they’ll have to hire from outside the region,” says Vladimir Sengleev, Prime Minister of Kalmykia.

Experts cite further concerns in turning a flailing agricultural economy into an energy hub:

“The remoteness, the tools, the drilling equipment, the rig. They are making some progress but a lot has to be done,” says Jim Copp, an operations supervisor from Tesco Drilling.

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