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 Between the crosses
Row on row.

1998 Unocal Statement:

Suspension of activities related to proposed
natural gas pipeline across Afghanistan
As a result of sharply deteriorating political conditions in the region, Unocal, which
serves as the development manager for the Central Asia Gas (CentGas) pipeline
consortium, has suspended all activities involving the proposed pipeline project in
Afghanistan.

From the 1998 Congressional Record.

Emphasis added to text.
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 land locked, 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

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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 kilometers 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 well head after all the transportation costs have been deducted. So it's the price
he receives for the oil he produces at the well head.
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.

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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.

US Policy On Taliban Influenced By Oil Deal Negotiations

The two claim that the US government's main objective in Afghanistan was to
consolidate the position of the Taliban regime to obtain access to the oil and gas
reserves in Central Asia.
They affirm that until August [2001], the US government saw the Taliban regime "as a
source of stability in Central Asia that would enable the construction of an oil pipeline
across Central Asia" from the rich oilfields in Turkmenistan, Uzbekistan, and
Kazakhstan, through Afghanistan and Pakistan, to the Indian Ocean. Until now, says the
book, "the oil and gas reserves of Central Asia have been controlled by Russia. The
Bush government wanted to change all that."

Click image for full size

But, confronted with Taliban's refusal to accept US conditions, "this rationale of energy
security changed into a military one", the authors claim.
"At one moment during the negotiations, the US representatives told the Taliban, 'either you accept
our offer of a carpet of gold, or we bury you under a carpet of bombs,'" Brisard said in an
interview in Paris.

The US government informed other nations of it's plan

to invade Afghanistan months before the 9/11 attacks
9 September 2001: Bush given Afghanistan invasion plan
7 October 2001: Bush announces opening of Afghanistan attacks
13 June 2002: Hamid Karzai Elected as New Afghan Leader
(Former Unocal Consultant)

27 December 2002: Afghanistan Pipeline Deal signed

An agreement has been signed in the Turkmen

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 capital, Ashgabat, paving the way for
construction of a gas pipeline from the Central
Asian republic through Afghanistan to Pakistan.
The building of the trans-Afghanistan pipeline
has been under discussion for some years but
plans have been held up by Afghanistan's
unstable political situation.

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