The salinity of Caspian Sea changes from the north to the south within a range of 1,0 to 13,5 parts per thousand. This difference is especially strongly present in the North Caspian. It is less obvious in other areas distinguished by self-relative homohalinity.

The isohaline 12,5% bending around the peninsula forms the ledge as if it moves more salty water masses to the east. This phenomenon is explained by freshening influence of the rivers' drain on the western coast of the Middle Caspian, which is allocated by branches of Main Caspian flow of cyclonic and anticyclonic directions.

The Middle Caspian Basin is home to mainly onshore oil deposits. The Middle Caspian Basin is divided into five regions.

Billions of barrels of oil have so far been proven to exist in the Middle Caspian Basin, with primary reservoirs consisting of Jurassic and Cretaceous rocks, while secondary reservoirs are found within the Tertiary.

Seismic data clearly illustrates that sediment thickness varies considerably from west to east, due to basin architecture and heterogeneities. In the deeper section from basement to base Jurassic, clear rift features can be seen; faulted basement blocks are present with deep graven infill of Triassic sediments. Evidence of compression and volcanism can be seen in this section through deep folds and strong amplitude seismic reflections within the South Mangyshlak Sub-basin.

Seismic data offshore Kazakhstan shows Jurassic strata directly overlying basement blocks, indicating areas where the Triassic is absent.

In the north, the mainly shallow water area forms part of the much larger North Caspian Basin which extends onshore some 400km to the north and east.

To the south of the Karpinsky Ridge - Mangyshlak Meganticline water depths increase dramatically and the geology also changes significantly. The area is structurally complex, being influenced by a number of tectonic events.

But, information about oil and natural gas reserves in the Caspian Sea dates back to ancient time. From 600 BC to 12 AD, Zoroastrians used to travel to Baku, located in Absheron Island in order to worship at a temple where a fire was burning all the time thanks to natural gas deposits hidden underground.

There is evidence showing that oil was a lucrative commodity in the 10^th century. Throughout the 13^th century, a large amount of oil was exported from Baku to other regions. The famous Italian merchant traveler, Marco Polo, refers to a large flow of oil in his description of Armenia, noting that a high number of camels was needed for carrying that amount of oil.

Industrial extraction of oil from the Caspian Sea Basin started in the 19^th century, making up the bulk of oil extracted in the world. Following the collapse of the Union of Soviet Socialist Republics (USSR), each of breakaway republics moved to recover oil in their own section and after that, different estimates were presented of oil deposits in the Caspian Sea. Some believe that industrial recovery of oil from the Caspian Sea started in the Gulf of Baku in 1923.

The world's first offshore wells and machine-drilled wells were made in Bibi-Heybat Bay, near Baku, Azerbaijan. In 1873, exploration and development of oil began in some of the largest fields known to exist in the world at that time on the Absheron peninsula near the villages of Balakhanli, Sabunchi, Ramana and Bibi Heybat. Total recoverable reserves were more than 500 million tons. By 1900, Baku had more than 3,000 oil wells, 2,000 of which were producing at industrial levels.

Potential hydrocarbon reserves in the Caspian Sea have encouraged the littoral states to drill in the land-locked sea for recovering oil and gas. Like other littoral states, Iran has not hesitated to conduct drilling in the Caspian Sea waters. Evidence first emerged of hydrocarbon reserves in Gorgan and Gonbad-e Kavous in northern Iran. The first and the most important exploration activities in the Iranian coasts of the Caspian Sea were carried out in Alamdeh-Neka, Kheshtsar near Mahmoud-Abad and south of Qaemshahr.

From 1951 to 1978 and particularly after the formation of National Iranian Oil Company (NIOC), the first exploration well was spudded near Mahmoud-Abad. Up to 1970, 16 wells had been drilled near mud volcanoes. All these wells produced only natural gas and technical studies showed that continuation of these operations would be uneconomical.

In 1998, NIOC assigned seismic testing on 31,000 square kilometers of the southern part of the Caspian Sea to a consortium of Shell, Lasmo and Veba Oil.

Following the establishment of KEPCO in December 1997, this company was tasked with exploring, development and operation of oil and gas reservoirs in the Caspian Sea as well as in the three coastal provinces of Gorgan, Guilan and Mazandaran.