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FTW Editor's 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-Afghani 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 Afghani 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 on July 3.
Michael C. Ruppert
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 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)
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 1 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.
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 G-8 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 G-8 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 January 31, Deputy Secretary of State Elizabeth Jones told Turkmeni 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 UN 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 Afghani 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;
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)
Dale Allen Pfeiffer is a Geologist and published author of several books. He may be reached at: [email protected] . He is also a 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
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