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The Forging of 'Pipelineistan'
Oil, Gas Pipelines High
Priority for U.S. in Central Asian Military Campaigns
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 SeaÕs 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 KazakhstanÕs 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 AlexanderÕs 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)
ChevronÕs involvement throughout the region
is quite ubiquitous. AlexanderÕs 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 Ōbroad-based government,Ķ 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 RussiaÕs 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 UnocalÕs 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 AfghanistanÕs interim leader,
Hamid Karzai, TurkmenistanÕs 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:ááá
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 ItalyÕs Eni oil company, said the Caspian contains
7.8 billion barrels of oil, the Interfax news agency reported.
This is confirmed by AgipÕs 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 OilÕs (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
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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 BPÕs 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:
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