Sent: Friday, October 12, 2001 2:31 PM
Subject: Fw: Mr. Chairman: The Caspian Sea Region Contains Tremendous Untapped Hydrocarbon Reserves...'98 Congressional Hearing
Fascinating. Afghanistan it turns out is a crucial link to build a pipeline
to get huge untapped energy reserves (oil) to Asia and other markets. All of
course to be developed by American companies. Once again this isn't about
terrorism. This is about oil just like the Gulf War was. Did somebody need
an excuse to invade Afghanistan and take it over.? Who knows that is just
conjecture obviously.
Read on Congressional hearings below.
Subject: Mr. Chairman: The Caspian Sea Region Contains Tremendous Untapped
Hydrocarbon Reserves...'98 Congressional Hearing
> "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
>
>
> I
> 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 k ilometers 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, 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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