| "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.] > > --- > Outgoing mail is certified Virus Free. > Checked by AVG anti-virus system (). > Version: 6.0.281 / Virus Database: 149 - Release Date: 9/18/01 > > "Fascism should rightly be called corporatism as it is a merge of state > and corporate power"...Benito Mussolini > > > DEFENCE of CANADIAN LIBERTY COMMITTEE/LE COMITÉ de la LIBERTÉ CANADIENNE > C/0 #401- 207 West Hastings St Vancouver BC Canada V6B1H7 > Tel: (604)872 2128; fax: (604) 872 -1504 or (604) 688-0550;cellular(604) > 202 7334; > E-MAIL ; > > "The constitution of Canada does not belong either to Parliament, or to the > Legislatures; it belongs to the country and it is there that the citizens > of the country will find the protection of the rights to which they are > entitled" Supreme Court of Canada A.G. of Nova Scotia and A.G. of Canada, |
