by Dale Allen
Pfeiffer
FTW Contributing Editor
for Energy
[Copyright 2002, From The Wilderness
Publications, www.copvcia.com. All Rights Reserved. May be copied,
distributed or reposted for non-profit purposes only]
[Ed. Note: The need for major
oil companies to monetize billions in investments in Central Asian oil
fields has been cited frequently by FTW as one of the major
motivations for
U.S. complicity in the attacks
of last September. Other motives have included economic control of an
estimated $200 billion in cash generated by the opium trade from the
region, geopolitical neutralization of potential threats to
U.S. global dominance and,
more recently, an apparently frenzied and progressively less coordinated
effort to do whatever is necessary to sustain a failing
U.S. economy.
We felt it important, 10 months
after 9-11, to take a close look at the status of the various pipeline projects
in and around
Afghanistan. The results are
surprising. There is no doubt that the
removal of Al Qaeda and the Taliban has added to the stability of the
entire region by removing their support for a number of Islamic terrorist
groups in Central Asia, Russia and the Caucasus -- all of which threatened
any pipeline construction projects from
the Caspian Sea and Central Asia. Even though Unocal still affirms that it
has no interest in a trans-Afghan gas pipeline it abandoned in 1998,
credible sources are indicating that it has not written off participation
in an oil pipeline that will follow the same route. But Afghan stability
remains an apparently unachieved objective.
What is becoming more apparent is
that an arrogant and increasingly criminal administration is less and less
effective in realizing its foreign policy objectives
and the resulting dangers of a global conflagration are increasing.
Is there an even larger agenda being pursued? Perhaps. But what we know,
10 months after 9-11, is that there is less of the coveted oil in the
region than was thought, and that the political stability necessary to
complete the pipelines is apparently more elusive than the Bush
Administration has hoped it would be. Nonetheless, pipeline construction
is still a high priority.
In this context we note a July 6
story from the Moscow Times reporting that the first-ever direct shipment
of Russian oil to the
U.S. consisting of 200,000
metric tons arrived in
Houston July 3. -- MCR]
July 10, 2002, 19:45 PDT (FTW) --
Pipelines and oil deals seem to be spreading out all over Central Asia.
The players include all of the major oil
companies, especially those with close ties to the Bush Administration,
along with Russian oil companies, the World Bank, the Asian Development
Bank, and the Central Asian republics themselves. Only the Afghanistan
pipeline seems to be moving slowly.
Meanwhile, Caspian Sea oil reserves have
been downgraded, British Petroleum shows more signs of industry
downsizing, and Matthew Simmons, an oil industry insider, is warning of a
perfect energy storm.
Who Owns Caspian Sea Resources?
Following the collapse of the Soviet
Union, the world energy industry began drooling over the newly formed
Central Asian republics and the Caspian Sea. Exploration quickly found
what appeared to be enormous, untapped fields of oil and natural gas.
Throughout the 1990s, deals were made with various countries claiming
ownership of energy reserves. Unfortunately, according to the Department
of Energy (DOE), the legal status of the Caspian Sea has yet to be
resolved.
Prior to 1991, the only countries
bordering the sea were the Soviet Union and Iran. These two countries were
bound by the 1921 and 1940 bilateral treaties, which stated that Caspian
resources were to be owned
jointly. Since the dissolution of the
Soviet Union and emergence of Kazakhstan, Turkmenistan and Azerbaijan,
there have been numerous disputes about resources in the Caspian Sea.
Disputes came to a head in July 2001, when Iranian gunboats confronted a
British Petroleum research vessel and ordered it out of waters to which
Iran lays claim.
Negotiations among the littoral states
have made very slow progress in ironing out the disputes. A summit of the
heads of state from the various Caspian Sea countries was postponed
several times in 2001, as it became apparent that parties could reach no
final agreement. For this reason, while many deals have been proposed
between various energy consortiums and republics, none have materialized.
Until the ownership status of the Caspian Sea has been resolved, there
will be no further development of the Sea's oil and gas resources. (See
source 1 below)
'Pipelineistan'
Ownership disputes do not extend to
continental reserves, as international borders have been clearly
delineated. Therefore, the development of land-based resources has been
met with a flurry of activity. Considering that the countries of Central
Asia are largely landlocked, there has been enormous pipeline building
activity to bring Central Asian energy resources to the markets where they
are needed.
Projects
are underway to ship energy north through modified Russian pipelines. The
largest of these projects is a 980-mile
pipeline from Kazakhstan's Caspian Sea oil fields across Kazakhstan and
Russia to the Black Sea port of Novorossiisk. Construction began in 1999,
and this pipeline is the largest single American investment in the region.
As reported by Alexander's Gas and Oil Connections website, the main
client for this pipeline will be TengizChevrOil, half of which is owned by
Chevron, a quarter by ExxonMobil and a quarter by Russian and Kazakh
partners. (See source 2)
There are also several projects
to either truck or pipe energy through Georgian territory, according to
the DOE. Chevron has a strong interest in this option, along with Conoco.
The U.S. Trade and Development Agency funded a $750,000 feasibility study
by Enron for a natural gas pipeline from Turkmenistan, through Azerbaijan
and Georgia, to Turkey. Another feasibility study was completed by Unocal.
There have been negotiating problems among the various countries, and PSO
(co-operator with Royal Dutch/Shell) closed its Turkmenistan office in
2000. Talks about the project have
resumed, but the legal issues of Caspian Sea ownership complicate the project.
(See source 3)
Chevron's involvement throughout the
region is quite ubiquitous. Alexander's Gas and Oil Connections reported
the company has invested more than $20 billion in Kazakhstan alone. From
1989 to 1992 National Security Adviser Condoleezza Rice was on the board
of directors of Chevron, and was its main expert on Kazakhstan.
Other projects
are also underway, most of them ending with energy in Turkey, where it
would be transported through the Bosporus Straits to markets in Europe.
There is a great deal of concern about Bosporus Straits traffic, which has
already become a major bottleneck for oil
tankers. There are environmental concerns about possible collision, and
for this reason, options are being considered for oil transiting the Black
Sea to bypass the Bosporus Straits.
As for the market, the big question has
been: should the pipelines flow east or west? The western route would be
easier, as much of the infrastructure is already in place. There are
several projects underway or completed
for bringing energy resources to the west. However, European oil demand
over the next 10 to 15 years is expected to grow by only one million
bbl/d, while Asian demand is expected to grow by at least 10 million bbl/d
over the same period. Therefore, greater profit is seen in piping these
resources to the east.
Unfortunately, an eastward route would
require the longest pipelines in the world. Formidable mountains would
require long detours to the north, or a shorter route to the south through
either Iran or Afghanistan and Pakistan. The Iranian route is prohibited
under the Iran and Libya Sanctions Act. Therefore, Afghanistan and
Pakistan are the choice for energy flowing eastward. (See source 4)
The Trans-Afghanistan Pipeline
Efforts to revive the trans-Afghanistan
pipeline began soon after the U.S. incursion into that country. The
pipeline from Turkmenistan to Pakistan was first discussed in the
late-1990s, with a consortium led by Unocal pushing the project.
Unocal backed out in 1998 after international financial institutions
refused to help cover the cost of the project
so long as Afghanistan was racked by armed conflict. (See source 5)
As reported by the Asia Times, in July
2001 a strategy to topple the Taliban and replace it with a "broad-based
government," was discussed during the G8 summit in Genoa, Italy. (This subject
was first broached in Geneva at a May 2001 meeting between the U.S. State
Department, Iran, Germany, and Italy.) Following within days of the G8
summit, secret negotiations were conducted in a Berlin hotel between
American, Russian, German and Pakistani officials. Pipelineistan was the
central topic of these negotiations, and a plan was set up for military
strikes against the Taliban from bases in Tajikistan
to be launched before mid-October 2001. (See source 6)
Soon after the invasion began in
October, the pipeline project was
discussed in Islamabad between Pakistani Petroleum Minister Usman
Aminuddin and American Ambassador
Wendy Chamberlain. Subsequently, during a
visit to Ashgabat, Turkmenistan on Jan. 31, Deputy Secretary of State
Elizabeth Jones told Turkmen President Saparmurat Niyazov that Washington
would support such pipeline projects so
long as they were commercially viable. (See source 7)
In April Niyazov called for the United
Nations to support a plan to build a gas pipeline linking Turkmenistan to
Pakistan, reported EurasiaNet. The project
was being touted for bringing stability to Afghanistan. Support from the
UN would boost the status of the project
and clear the way for guarantees from international institutions like the
UN Development Program. (See source 8) Also in April as reported by Agence
France-Presse, World Bank chief
James Wolfensohn said he had held talks
about financing the Trans-Afghanistan gas pipeline. Wolfensohn, during a
visit to the Afghanistan capital, Kabul, stated that a number of companies
had already expressed interest in the project.
(See source 9)
So far, no corporations have been named
as firmly signing on to the project.
Several sources have stated that Unocal will likely come forward again to
join in the project,
according to the DAWN Group of Newspapers. (See source 10) Most notably,
Afghan Minister for Mines and Industries Mohammad Alim Reza has stated
that Unocal was still in the lead attempting to win the $2 billion
trans-Afghanistan pipeline. (See source 11) According to NewsBase, Unocal
followed this announcement with a statement that it has no intention of
reviving the Central Asia Gas Pipeline (CentGas) project.
(See source 12) However, Unocal has made no statement contradicting
reports that it has a project to build
the Central Asian oil pipeline, linking Turkmenistan both to Russia's
existing Siberian oil pipelines and to the Pakistani coast. This oil
pipeline will run parallel to the proposed gas pipeline route through
Afghanistan, reported the Asia Times. (See source 13) It is possible that
Unocal's denial of interest in the gas pipeline could
just be for public consumption. Prior to
stepping down from the CentGas project,
Unocal was targeted by human rights groups for its dealings with the
Taliban.
Energy experts have indicated that
companies owned or formerly managed by Bush senior and Vice President Dick
Cheney are showing a keen interest in Caspian Sea reserves, the DAWN Group
reported. (See source 14) And the U.S. is expecting investment from
U.S.-based energy conglomerates through Overseas Private Investment
Corporation (OPIC) to resuscitate the Afghan pipeline project.
(See source 15) It has been noted that despite assurances from Afghan and
Pakistani leaders, continued volatility in the region is deterring energy
corporations from offering to help build the pipeline. It is suggested
that it may take several years of political stability before the project
could be seriously revived. However, the Asian Development Bank (ADB) is
also keenly interested in the project.
ADB loans will likely be used to cover part of the cost of building the
gas transport system, with funds from donor countries for the
reconstruction of Afghanistan covering the rest, according to the BBC and
NewsBase. (See sources 16 and 17) It will be interesting to see what role
Halliburton, formerly chaired by Cheney, plays in the pipeline
construction.
On May 30 Afghanistan's interim leader,
Hamid Karzai, Turkmenistan's President Niyazov, and Pakistani President
Pervez Musharraf met in Islamabad to sign a memorandum of understanding on
the trans-Afghanistan pipeline project.
As a first step, the three countries will begin work on a feasibility
study. A preliminary assessment will be issued in late-September and the
three leaders will meet for more talks on the project
in October, reported NewsBase. (See source 18) The
Turkmen-Afghan-Pakistani gas pipeline accord has been published and can be
viewed at the following website:
http://www.gasandoil.com/goc/news/nts22622.htm.
Caspian Oil Estimate Revised Down
Early estimates of Caspian Sea oil
reserves ranged from 115 billion to 200 billion barrels. These estimates
have been rightfully viewed with scepticism as they were based on a 10
percent probability of recovery -- that is, they were considering oil that
could not be recovered. Now this assessment has been severely downgraded
by oil industry insiders.
Speaking on April 8 in Almaty,
Kazakhstan at the Eurasian Economic Summit, Gian Maria Gros-Pietro,
chairman of Italy's Eni oil company, said the Caspian contains 7.8 billion
barrels of oil, the Interfax news agency reported. This is confirmed by
Agip's statement in Energy Day of May 30 that the recoverable reserve
potential of Kashagan is only 1.2 billion barrels. With these revisions,
it is questionable whether the Caspian Sea region will ever approach the
importance of the Middle East with regard to energy reserves, according to
the Association for the Study of Peak Oil's (APSO) June newsletter. (See
source 19)
Finally, in reference to the table below
of world energy reserves, note that the Caspian Sea region is included in
the Former Soviet Union, amounting to less than one tenth of Middle East
reserves. In fact, added together, the rest of the world only contains
364.5 thousand million barrels in proven reserves, or 53 percent of the
proven reserves of the Middle East.
Source: BP Statistical Review of World
Energy 2002;
http://www.bp.com/centres/energy2002/index.asp

More Evidence of Oil Company
Downsizing
Also from the June APSO newsletter, we
find more evidence of oil company downsizing.
The newsletter cites World Oil articles stating first that British
Petroleum has decided to completely
curtail political contributions in the U.S. BP spent $834,000 in such
contributions in 2001. The APSO observes that this decision says more
about reduced activity than anything else. [Ed. Note: Although it may say
something about BP's grand
jury exposure for bribery allegations in
the U.S. and its 2000 campaign donations to Attorney General
John Ashcroft. -- MCR] Likewise, BP is
replacing staff with consultants. The aim is to downsize the staff of
various drilling operations by between 30 percent and 40 percent. This
does not speak well for future drilling activity. (See source 20)
The Perfect Energy Storm
Finally, from a presentation at the June
21 Energen Corporation Board Retreat, Matthew R. Simmons, president of
Simmons & Company International (an investment banker for the energy
industry) spoke about a looming natural gas crisis.
Toward the end of his presentation,
Simmons listed the following ingredients for a perfect energy storm:
- Third quarter of 2002 sees the
arrival of a material supply drop
- A hot, muggy summer turns on a record
level of gas turbines (100,000 MW+)
- One hurricane roams through the
Gulf of Mexico Suddenly, the gas storage cushion is gone.
"We might be passing through the eye of
a hurricane," Simmons warned.
(See source 21)
_______________
Notes:
1)
http://www.eia.doe.gov/cabs/caspian.html
2)
http://www.gasandoil.com/goc/news/ntc20665.htm
3)
http://www.eia.doe.gov/cabs/caspian.html
4)
http://www.gasandoil.com/goc/features/fex20867.htm
5)
http://www.gasandoil.com/goc/news/nts22628.htm
6)
http://www.gasandoil.com/goc/features/fex20867.htm
7)
http://www.gasandoil.com/goc/news/ntr20811.htm
8)
http://www.gasandoil.com/goc/news/ntc22240.htm
9)
http://www.gasandoil.com/goc/news/nts22408.htm
10)
http://www.gasandoil.com/goc/news/nts22268.htm
11)
http://www.gasandoil.com/goc/news/nts22404.htm
12)
http://www.gasandoil.com/goc/company/cns22416.htm
13)
http://www.gasandoil.com/goc/features/fex20867.htm
14)
http://www.gasandoil.com/goc/news/nts22404.htm
15)
http://www.gasandoil.com/goc/features/fex20867.htm
16)
http://www.gasandoil.com/goc/news/nts22628.htm
17)
http://www.gasandoil.com/goc/company/cnr22210.htm
18)
http://www.gasandoil.com/goc/news/nts22628.htm
19)
http://www.isv.uu.se/iwood2002/Newsletter/Newsletter.html
20)
http://www.isv.uu.se/iwood2002/Newsletter/Newsletter.html
21)
http://www.simmonsco-intl.com/domino/html/research.nsf/DocId/
B5EB40172B26ABE586256BEA00673746/$File/energenprinter.pdf
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