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The Oil War 

UNOCAL’s once-grand plan for Afghan pipelines

Wednesday, Nov 28 2001
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A victory by the U.S.-led coalition and its Northern Alliance supporters would not only boost America’s power and influence in this strategic Caspian region, but it would reopen the door to a potential energy windfall for the West.

Afghanistan’s oil, gas and coal reserves are waiting to be exploited. And neighboring Turkmenistan, the former Soviet Republic, is loaded with resources, waiting to go to market. But landlocked by Uzbekistan and Kazakhstan on the north and east, Afghanistan and Iran on the south, and bordered by the Caspian Sea to its west, Turkmenistan has struggled to find a viable supply route.

A 1995 proposal by UNOCAL, the Southern California oil giant, shows what might be in store and gives a hint of influence the oil-friendly Bush administration could have in charting the future of the strategic region. UNOCAL proposed building twin oil and gas pipelines from Turkmenistan, south through Afghanistan and Pakistan, to a shipping terminal on the Arabian Sea, with a possible pipeline extension into India. To date, the roadblocks have been twofold: Afghanistan’s ongoing civil war and the lack of international recognition for the Taliban government. UNOCAL says it has pulled out of the project.

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A U.S. Department of Energy (DOE) report, issued in June, ranked Turkmenistan’s reserve of natural gas, with more than 101 trillion cubic feet, as the fifth largest in the world. After the breakup of the USSR, this newly independent nation became embroiled in a payment dispute with the Russian gas giant Gazprom, and lost its access to the region’s only pipeline.

UNOCAL, which has been publicly criticized for alleged human-rights abuses involving its Burma pipeline operation, signed an agreement in 1995 with Turkmenistan’s president for life, Saparmurat Niyazov, to build the 890-mile, $2 billion pipeline. Its goal was to transport 1.9 billion cubic feet per day of natural gas from the country’s giant Dauletabad Field into Pakistan’s energy grid. The project has been on hold for several years.

Barry Lane, a UNOCAL spokesman, says there were only two viable routes for this pipeline: Iran or Afghanistan. “And the U.S. sanctions against doing business with Iran left us only one option,” he says. Hoping to hedge its bets against Iran or future OPEC cutbacks, the Clinton administration offered backing for the projects.

In 1997, UNOCAL joined with Turkmenistan and six international companies: Delta Oil company (Saudi Arabia), Indonesia Petroleum and ITOCHU Oil Exploration Co. (Japan), Hyundai Engineering & Construction Co. (South Korea), Crescent Group (Pakistan) and the Russian company Gazprom to form the Central Asia Gas ä Pipeline consortium (CentGas). However, UNOCAL remained the driving force, controlling nearly half of its shares.

In addition to the natural-gas pipeline, UNOCAL also proposed building a second 1,000-mile, $2.5 billion oil pipeline to take 1 million barrels per day from Turkmenistan’s proven reserves of 546 million barrels. The country also has an estimated 1.7 billion barrels in offshore areas under the Caspian Sea.

After UNOCAL completed negotiations with Niyazov, it opened talks with the Taliban and opposition groups in the north, which later became the Northern Alliance. The proposed deals would have paid Afghanistan up to $100 million per year for access across its territory.

To show its good will, UNOCAL donated money to CARE projects in Afghanistan and provided support for in-country earthquake relief efforts. The oil giant also gave nearly a million dollars to the University of Nebraska’s Center for Afghan Studies. The money was used to provide pipeline-construction training for Afghans and schooling for their children.

At the time UNOCAL was also being attacked by feminist groups for working with the Taliban, whose regime denies human rights to women. But Lane insists that issue was repeatedly raised during their pipeline talks, and company-financed schooling was given to both boys and girls.

Lane says that CentGas met several times with Taliban delegations and factions of the Northern Alliance. The meetings occurred during 1997 in Afghanistan and at UNOCAL’s Texas office. But little headway was made. “The project quickly began to deteriorate,” he says. “We emphasized to the Taliban they had to form a stable government that would be internationally recognized, before any construction could begin.”

Lane says he wasn’t involved in the Texas meetings and doesn’t know whether then-Governor George W. Bush, an ex–oil man, ever had any involvement. UNOCAL’s Texas spokesperson for Central Asia operations, Teresa Covington, said the consortium delivered three basic messages to the Afghan groups. “We gave them the details on the proposed pipelines. We also talked to them about the projects’ benefits, such as the transit fees that would be paid,” she says. “And we reinforced our position the project could not move forward until they stabilized their country and obtained political recognition from the U.S. and the international community.”

Covington says the Taliban were not surprised by that demand. “They had heard it before.” And, she adds, the Taliban asked UNOCAL if it was interested in developing Afghanistan’s energy resources.

Afghanistan’s supplies are dwarfed by Turkmenistan’s. The DOE and industry analysts recently reported the Afghans have natural-gas reserves of 5 trillion cubic feet. With Soviet assistance, by the mid-1970s, that country was producing 275 million cubic feet per day. Plans were made to increase production, but mujahedeen sabotage destroyed the infrastructure. After the Russian pullout in 1989, 31 wells were shut down. The ongoing civil war in the north thwarted the Taliban’s attempts to repair the distribution network.

Afghanistan’s proven oil reserves are estimated at 95 million barrels. Oil exploration and development ended with the Soviet invasion of 1979. In 1998 the Taliban announced plans to revive the Afghan National Oil Company, shut down 22 years ago. However, like its gas reserves, Afghan’s oil fields lie in the country’s previously contested northern provinces.

Afghanistan is also estimated to have some 73 million tons of coal reserves, most of it located between the towns of Herat and Badashkan in the northwest, an area heavily bombed by U.S. warplanes and now controlled by Northern Alliance forces.

In December 1997, UNOCAL arranged a high-level meeting in Washington, D.C., for the Taliban with Clinton’s undersecretary of state for South Asia, Karl Inderforth. The Taliban delegation included Acting Minister for Mines and Industry Ahmad Jan, Acting Minister for Culture and Information Amir Muttaqi, Acting Minister for Planning Din Muhammad and Abdul Hakeem Mujahid, their permanent U.N. delegate.

Two months later UNOCAL vice president for international relations John Maresca testified before a House Committee on International Relations about the need for multiple pipeline routes in Central Asia. Maresca briefed the members about the proposed Afghan pipeline projects, praising their economic benefits and asking for U.S. support in negotiating an Afghan settlement.

But with no progress on the diplomatic and northern war fronts, financing could not be secured, and the CentGas project stalled. In August 1998, UNOCAL began throwing in the towel. It suspended its participation in the consortium. Two months later it formally withdrew.

Covington says the company has turned its attention to other parts of the world and doesn’t plan on returning to these projects. However, backed by Pakistan and Delta, the Saudi consortium member, Turkmenistan’s Niyazov continues to pursue financing.

A representative of the Turkmenistan embassy, who spoke on condition of anonymity, acknowledged the pipelines were on hold. “We understand the situation in Afghanistan needs to be stabilized and guarantees against terrorist attacks must be obtained before anything can change,” he says.

“But this is a very important project for our country, and it would profit everyone involved,” he insists. “So we are hoping that once peace is restored in Afghanistan, building these pipelines will again become a priority.”

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