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Subject: ABC NIGHTLINE ....THE OIL RUSH
Date: Fri, Nov 14, 1997 02:13 EST
From: KHatton704
Message-id: <19971114071301.CAA02698@ladder01.news.aol.com>
ABC NIGHTLINE aired an show on THE OIL RUSH here's the story....Kevin
By Jorgen Wouters
ABCNEWS.com
Nov. 12 -Several former Soviet republics surrounding the Caspian Sea are
poised to unleash the greatest oil rush the world has seen in decades.
ÿÿÿÿ One of them, Azerbaijan, started pumping its black gold for export
today after years of delays and false starts.
ÿÿÿÿ A worker pours liquid sulphur at an oil refinery built by the
Republic of Kazakstan and Chevron Corp. (Reuters) Since the Soviet
Union's breakup, the struggle to control the Caspian Sea's rich energy
reserves has produced little oil but plenty of frustrated businessmen,
broken contracts and international lawsuits.
ÿÿÿÿ But after six years of Byzantine negotiations, winners and losers
are emerging in this high-stakes game of money and realpolitik whose
players include the world's most powerful oil companies and the
governments of Russia, China, Iran and the United States.
ÿÿÿÿ "The Caspian is the new frontier in the global oil industry," said
Richard Matzke, president of Chevron Overseas Petroleum Inc.
A Prize Worthy of Midas
The stakes are high, but the payoff will be in the trillions.
ÿÿÿÿ Proven oil and gas reserves in four countries surrounding the
Caspian Sea-Azerbaijan, Kazakstan, Turkmenistan and Uzbekistan-total
some 68 billion barrels of oil, a third more than western Europe's
reserves, Wood Mackenzie Consultants said in a recent report.
ÿÿÿÿ The Edinburgh-based consultancy estimates total oil output from the
region could hit 3.4 million barrels per day by 2010 with Kazakstan and
Azerbaijan accounting for nearly 90 percent of production. Regional oil
production at the moment is less than a million barrels a day.
ÿÿÿÿ The region also has the capacity to produce approximately 25
billion cubic feet a day of natural gas.
ÿÿÿÿ Although some reports portray the Caspian Sea as a 21st century
challenger to the Middle East, the most optimistic estimates for the
region peak at roughly 200 billion barrels of oil, compared to the 700
billion barrels in proven Middle Eastern reserves.
ÿÿÿÿ "This is not a threat to the Middle East by any means," said John
Lichtblau, chairman of the Petroleum Research Industry Foundation. But,
he emphasized, the region is an "important secondary source" of oil that
spreads the risk of overdependence on the Middle East.
ÿÿÿÿ And the petroleum-hungry globe's appetite is growing.
ÿÿÿÿ Experts estimate world demand for crude oil could rise 30 percent
by the year 2010. And the world's largest customer-the United States-may
be importing 70 percent of its oil by 2010, compared to 50 percent
today.
Winners and Losers
Ironically, the biggest winners were some the former Soviet Union's most
impoverished republics.
ÿÿÿÿ Although oil has been flowing out of the Caspian region for more
than a century, the Soviet Union never devoted the capital necessary to
fully exploit the region's huge reserves.
ÿÿÿÿ "Large fields were never fully developed, so the Caspian has one of
the largest inventories of untapped oil in the world," said Carl
Burnett, President of Mobil Oil Kazakstan Inc.
ÿÿÿÿ Almost all players involved stand to win big, except Russia, which
less than a decade ago ruled the region.
ÿÿÿÿ "By and large, Russia has lost," Lichtblau said. "Azerbaijan will
be the winner, Kazakstan as well."
ÿÿÿÿ While Azerbaijan started pumping oil for export today, a crucial
pipeline out of Kazakstan won't be finished until the year 2000.
ÿÿÿÿ Another loser-at least for now- is the impoverished desert nation
of Turkmenistan. Although the former Soviet republic styles itself as
the "Kuwait on the Caspian," it's actually suffered a decline in oil and
natural gas production in recent years. And Turkmenistan's main oil
refinery is a rusting, World War II-era plant in dire need of
modernization whose pipelines exist only on paper.
Oil Giants Eager for a Return
Gas burns at an oil refinery in Kazakstan (Reuters) Major international
oil companies have poured billions of dollars into all the Caspian's
major projects major projects since the early 1990s, and are anxious to
realize a return on their investments.
ÿÿÿÿ But in return for the billions invested, analysts estimate the oil
and gas fields will eventually yield revenue in the trillions of
dollars.
ÿÿÿÿ Much of the drilling in the region's two most promising oil and gas
producers-Azerbaijan and Kazakstan-is being carried out by U.S.
petro-giants like Chevron, Amoco and Exxon. But companies from Europe,
Russia and China are deeply involved as well, as are regional
governments.
ÿÿÿÿ The Woods Mackenzie report said a total of 40 active contracts have
been signed involving 53 companies from 22 countries. The report singled
out Mobil, which enjoys stakes in Azerbaijan and Kazakstan, as the
foreign oil company best positioned to profit from the region.
History Repeating Itself
The quest for Caspian oil is nothing new.
ÿÿÿÿ When the region's vast energy reserves were discovered in the late
19th century, the competition between the British and Russian empires
for the upper hand was known as the "Great Game."
ÿÿÿÿ But since none of the modern-day players profits from untapped
oil-and military solutions are no longer an option- the parties have
begun to compromise.
ÿÿÿÿ In one surprising policy shift, Washington dropped objections to a
proposed $1.6 billion pipeline to carry Turkmenistan's natural gas
across Iran and on to Turkey.
ÿÿÿÿ The United States had flexed its muscle to block all proposed
pipelines through Iran, which Washington accuses of sponsoring
international terrorism, but dropped its objections when they held up
the Caspian oil boom by delaying development of the pipelines.
ÿÿÿÿ "The political problems can be fixed, because everyone wants to
make money," said Guychnazar Tachnazarov, head of Turkmenistan's state
gas company. "If we start real work, the new pipeline can be done in two
to three years."
The Chechen Question
But for all the optimistic forecasts, nothing seems to go smoothly in
the Caspian. Azerbaijan currently has all its eggs in one basket, and
the road is rocky.
ÿÿÿÿ The region's only existing export pipeline happens to run through
war-ravaged Chechnya on its journey to Russia's Black Sea coast.
ÿÿÿÿ Russian officials and leaders of the breakaway republic bickered
for months before finally reaching a deal to send oil across 90 miles of
the shattered countryside.
ÿÿÿÿ "Pipelines are very easily sabotaged, but can be easily fixed as
well," said Lichtblau.
ÿÿÿÿ Natik Aliyev, head of Azerbaijan's state-run oil company, said that
one way or another, a solution will be found. "If we manage to work with
Russia [and Chechnya], it's fine. If we don't, we are going to find
other ways to guarantee the delivery of Azerbaijani oil to world
markets."
Dealing in the Neighboring Powers
Most Caspian oil and gas belongs to Azerbaijan, Kazakstan and
Turkmenistan. But all are surrounded by more powerful neighbors who want
a piece of the action, making deals that much harder to consummate.
ÿÿÿÿ Russia still considers the Caspian region and Central Asia as a
sphere of influence and wants as many pipelines as possible to cross its
territory.
ÿÿÿÿ "Russia's desire to control Central Asia can be seen by a blind
man," said Tsalik Nayberg, chief representative in Turkmenistan for the
U.S. oil company Unocal.
ÿÿÿÿ The urgent need for pipelines has inspired some hazardous
proposals, and Nayberg is working on one of the riskiest-a $1.9 billion
line that would run over Turkmenistan's harsh desert, cross war-torn
Afghanistan and terminate at a Pakistani port on the Arabian Sea.
ÿÿÿÿ And China plans to build a 2,000 mile pipeline linking it to
Kazakstan in a venture some analysts say doesn't make economic sense.
ÿÿÿÿ The United States government wants multiple pipelines in several
directions to prevent Russia, Iran or anyone else from gaining undue
influence over the region's energy reserves.
Deals at a Glance
Caspian Pipeline Consortium (CPC)
A $2 billion consortium formed to build a 1000 mile pipeline from
Kazakstan's Tengiz deposit to Russia's Black Sea port of Novorossiisk.
Members include Kazakstan, Russia and Oman, as well as Chevron Corp.,
Mobil Corp. and Russia's LUKoil. The pipeline is due to be finished in
2000 and will initially accommodate 560,000 barrels per day (bpd), with
capacity rising to 1.34 million bpd by 2012-2014. Tengizchevroil (TCO)
A $20 billion joint venture between Kazakstan, Chevron and Mobil formed
to tap Kazakstan's onshore Tengiz field. The deposit already produces
150,000 bpd. Output is estimated to hit 220,000 bpd by 2000, and
600-700,000 bpd by 2010. The joint venture will be the main customer of
the CPC. China National Petroleum Company (CNPC)
Signed a $9.5 billion package of oil deals with Kazakstan to tap its
Uzen oilfields.The deal includes construction of a 2,000 mile pipeline
linking Kazak fields with China. Production from the Uzen oil field is
projected to hit 160,000 bpd in 5-6 years. CNPC plans to complete the
pipeline by 2002, which will have a capacity of 400,000 bpd. |
