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From: Bob Olsen <[EMAIL PROTECTED]>
Date: Sat, 13 Oct 2001 00:02:16 -0400
To: [EMAIL PROTECTED]
Subject: Oil, War and Afghanistan: 1998
Date: Fri, 12 Oct 2001 08:53:57 -0700
From: Connie Fogal <[EMAIL PROTECTED]>
"From the outset, we have made it clear that construction
of the pipeline we have proposed across Afghanistan could
not begin until a recognized government is in place that
has the confidence of governments, lenders, and our company. "
Mr. John J. Maresca, vice-president of international relations,
Unocal Corporation Feb 12, 1998
U.S. INTERESTS IN THE CENTRAL ASIAN REPUBLICS HEARING BEFORE THE
SUBCOMMITTEE ON ASIA AND THE PACIFIC OF THE COMMITTEE ON
INTERNATIONAL RELATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTH
CONGRESS SECOND SESSION FEBRUARY 12, 1998
Next we would like to hear from Mr. John J. Maresca, vice president
of international relations, Unocal Corporation. You may proceed as
you wish.
STATEMENT OF JOHN J. MARESCA, VICE PRESIDENT OF INTERNATIONAL
RELATIONS, UNOCAL CORPORATION
Mr. Maresca. Thank you, Mr. Chairman. It's nice to see you again. I
am John Maresca, vice president for international relations of the
Unocal Corporation. Unocal, as you know, is one of the world's
leading energy resource and project development companies. I
appreciate your invitation to speak here today. I believe these
hearings are important and timely. I congratulate you for focusing on
Central Asia oil and gas reserves and the role they play in shaping
U.S. policy.
I would like to focus today on three issues. First, the need for
multiple pipeline routes for Central Asian oil and gas resources.
Second, the need for U.S. support for international and regional
efforts to achieve balanced and lasting political settlements to the
conflicts in the region, including Afghanistan. Third, the need for
structured assistance to encourage economic reforms and the
development of appropriate investment climates in the region. In this
regard, we specifically support repeal or removal of section 907 of
the Freedom Support Act.
Mr. Chairman, the Caspian region contains tremendous untapped
hydrocarbon reserves. Just to give an idea of the scale, proven
natural gas reserves equal more than 236 trillion cubic feet. The
region's total oil reserves may well reach more than 60 billion
barrels of oil. Some estimates are as high as 200 billion barrels. In
1995, the region was producing only 870,000 barrels per day. By 2010,
western companies could increase production to about 4.5 million
barrels a day, an increase of more than 500 percent in only 15 years.
If this occurs, the region would represent about 5 percent of the
world's total oil production.
One major problem has yet to be resolved: how to get the region's
vast energy resources to the markets where they are needed. Central
Asia is isolated. Their natural resources are landlocked, both
geographically and politically. Each of the countries in the Caucasus
and Central Asia faces difficult political challenges. Some have
unsettled wars or latent conflicts. Others have evolving systems
where the laws and even the courts are dynamic and changing. In
addition, a chief technical obstacle which we in the industry face
in transporting oil is the region's existing pipeline infrastructure.
Because the region's pipelines were constructed during the
Moscow-centered Soviet period, they tend to head north and west
toward Russia. There are no connections to the south and east. But
Russia is currently unlikely to absorb large new quantities of
foreign oil. It's unlikely to be a significant market for new energy
in the next decade. It lacks the capacity to deliver it to other
markets.
Two major infrastructure projects are seeking to meet the need for
additional export capacity. One, under the aegis of the Caspian
Pipeline Consortium, plans to build a pipeline west from the northern
Caspian to the Russian Black Sea port of Novorossiysk. Oil would then
go by tanker through the Bosporus to the Mediterranean and world
markets.
The other project is sponsored by the Azerbaijan International
Operating Company, a consortium of 11 foreign oil companies,
including four American companies, Unocal, Amoco, Exxon and Pennzoil.
This consortium conceives of two possible routes, one line would
angle north and cross the north Caucasus to Novorossiysk. The other
route would cross Georgia to a shipping terminal on the Black Sea.
This second route could be extended west and south across Turkey to
the Mediterranean port of Ceyhan.
But even if both pipelines were built, they would not have enough
total capacity to transport all the oil expected to flow from the
region in the future. Nor would they have the capability to move it
to the right markets. Other export pipelines must be built.
At Unocal, we believe that the central factor in planning these
pipelines should be the location of the future energy markets that
are most likely to need these new supplies. Western Europe, Central
and Eastern Europe, and the Newly Independent States of the former
Soviet Union are all slow growth markets where demand will grow at
only a half a percent to perhaps 1.2 percent per year during the
period 1995 to 2010.
Asia is a different story all together. It will have a rapidly
increasing energy consumption need. Prior to the recent turbulence in
the Asian Pacific economies, we at Unocal anticipated that this
region's demand for oil would almost double by 2010. Although the
short-term increase in demand will probably not meet these
expectations, we stand behind our long-term estimates.
I should note that it is in everyone's interest that there be
adequate supplies for Asia's increasing energy requirements. If
Asia's energy needs are not satisfied, they will simply put pressure
on all world markets, driving prices upwards everywhere.
The key question then is how the energy resources of Central Asia can
be made available to nearby Asian markets. There are two possible
solutions, with several variations. One option is to go east across
China, but this would mean constructing a pipeline of more than 3,000
kilometers just to reach Central China. In addition, there would
have to be a 2,000-kilometer connection to reach the main population
centers along the coast. The question then is what will be the cost
of transporting oil through this pipeline, and what would be the
netback which the producers would receive.
For those who are not familiar with the terminology, the netback is
the price which the producer receives for his oil or gas at the
wellhead after all the transportation costs have been deducted. So
it's the price he receives for the oil he produces at the wellhead.
The second option is to build a pipeline south from Central Asia to
the Indian Ocean. One obvious route south would cross Iran, but this
is foreclosed for American companies because of U.S. sanctions
legislation. The only other possible route is across Afghanistan,
which has of course its own unique challenges. The country has been
involved in bitter warfare for almost two decades, and is still
divided by civil war. From the outset, we have made it clear that
construction of the pipeline we have proposed across Afghanistan
could not begin until a recognized government is in place that has
the confidence of governments, lenders, and our company.
Mr. Chairman, as you know, we have worked very closely with the
University of Nebraska at Omaha in developing a training program for
Afghanistan which will be open to both men and women, and which will
operate in both parts of the country, the north and south.
Unocal foresees a pipeline which would become part of a regional
system that will gather oil from existing pipeline infrastructure in
Turkmenistan, Uzbekistan, Kazakhstan and Russia. The 1,040-mile long
oil pipeline would extend south through Afghanistan to an export
terminal that would be constructed on the Pakistan coast. This
42-inch diameter pipeline will have a shipping capacity of one
million barrels of oil per day. The estimated cost of the project,
which is similar in scope to the trans-Alaska pipeline, is about $2.5
billion.
Given the plentiful natural gas supplies of Central Asia, our aim is
to link gas resources with the nearest viable markets. This is basic
for the commercial viability of any gas project. But these projects
also face geopolitical challenges. Unocal and the Turkish company Koc
Holding are interested in bringing competitive gas supplies to
Turkey. The proposed Eurasia natural gas pipeline would transport gas
from Turkmenistan directly across the Caspian Sea through Azerbaijan
and Georgia to Turkey. Of course the demarcation of the Caspian
remains an issue.
Last October (1997), the Central Asia Gas Pipeline Consortium, called
CentGas, in which Unocal holds an interest, was formed to develop a
gas pipeline which will link Turkmenistan's vast Dauletabad gas field
with markets in Pakistan and possibly India. The proposed 790-mile
pipeline will open up new markets for this gas, traveling from
Turkmenistan through Afghanistan to Multan in Pakistan. The proposed
extension would move gas on to New Delhi, where it would connect with
an existing pipeline. As with the proposed Central Asia oil pipeline,
CentGas can not begin construction until an internationally
recognized Afghanistan Government is in place.
The Central Asia and Caspian region is blessed with abundant oil and
gas that can enhance the lives of the region's residents, and provide
energy for growth in both Europe and Asia. The impact of these
resources on U.S. commercial interests and U.S. foreign policy is
also significant. Without peaceful settlement of the conflicts in the
region, cross-border oil and gas pipelines are not likely to be
built. We urge the Administration and the Congress to give strong
support to the U.N.-led peace process in Afghanistan. The U.S.
Government should use its influence to help find solutions to all
of the region's conflicts.
U.S. assistance in developing these new economies will be crucial to
business success. We thus also encourage strong technical assistance
programs throughout the region. Specifically, we urge repeal or
removal of section 907 of the Freedom Support Act. This section
unfairly restricts U.S. Government assistance to the government of
Azerbaijan and limits U.S. influence in the region.
Developing cost-effective export routes for Central Asian resources
is a formidable task, but not an impossible one. Unocal and other
American companies like it are fully prepared to undertake the job
and to make Central Asia once again into the crossroads it has been
in the past. Thank you, Mr. Chairman.
[The prepared statement of Mr. Maresca appears in the appendix.]
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Bob Olsen Toronto <[EMAIL PROTECTED]
Capitalism is war
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