Dr Farrukh Saleem
http://www.jang.com.pk/thenews/jun2004-daily/27-06-2004/oped/o4.htm

Kazakhstan, Azerbaijan and Turkmenistan have lot of oil and a whole lot of gas. All that oil and all that gas are going to pass through Pakistan. We are the only bridge between Central Asian oil and the rest of the world. But, are we? Are we going to make hundreds of millions of dollars in transit fees every year?

First things first. The two principal engines of growth in Asia are China and India. India is now the 3rd largest economy (purchasing power parity basis) on the face of the planet. As India grows so would its need for oil and gas (India doesn’t have much of its own).

In order for pipelines to be economically viable the reservoirs have to be large enough so as to be able to fulfil the needs of the user for a good 30 to 40 years. The three primary reservoirs of oil and gas in the region are: Apsheron Trend Oil Field, Dauletabad Gas Field and South Pars Gas Field.

Not too long ago estimates of Caspian Sea oil reserves ranged from 115 billion to 200 billion barrels. Central Asia was being looked at as being the largest reservoir of oil and gas. More recent estimates have drastically cut down almost all figures down to under 20% of original claims. Kazakhstan’s proven oil reserves are sharply down (from earlier estimates) to between 9 to 17.6 billion barrels. Azerbaijan’s proven oil reserves are sharply down (from earlier estimates) to between 3.6 to 12.5 billion barrels. Turkmenistan’s natural gas reserves have now been estimated at 98 to 115 trillion cubic feet.

According to Energy Information Administration (http://www.eia.doe.gov/emeu/cabs/caspstats.html), "the Caspian Sea region contains proven oil reserves. Comparable to Qatar on the low end and the United States on the high end. In 2002, regional oil production reached roughly 1.6 million barrels per day comparable to South America’s second largest oil producer, Brazil."

On the gas side of the equation, the "Caspian Sea Region’s proven natural gas reserves are. Comparable to Saudi Arabia. Regional production reached approximately 4.5 trillion cubic feet in 2001 comparable to the combined production of South America, Central America and Mexico."

Apsheron Trend Oil Field: The most direct, the shortest and the least expensive route for Apsheron’s oil to reach the world markets are the Southern Corridor through Iran. The U.S. has, however, vetoed this option. The next best would be the Eastern Corridor into Kazakhstan and then to the Russian Black Sea port of Novorossiysk (using more or less existing pipeline infrastructure). The U.S. isn’t going to allow Russian control over oil either. America’s preferred route for Apsheron’s oil is the Western Corridor through Turkey. The Western Corridor will be 1,038 miles in length and cost $2.9 billion. America, it appears, is willing to foot the bill just to isolate both Iran and Russia. A detailed engineering study of a pipeline from Baku (Azerbaijan) into Tbilisi (Georgia) and on to Turkey’s Mediterranean port of Ceyhan was completed in June 2002. With a planned capacity of 1 million barrels per day the Baku-Tbilisi-Ceyhan Pipeline is targeted to be operational by early 2005.

Caspian Sea oil does not come without its legal entanglements. Prior to 1991, Iran and the Soviet Union were the only countries bordering the Caspian Sea. Iran and the Soviet Union had concluded two bilateral treaties stating, "Caspian resources were to be owned jointly." Technically, Caspian resources now belong to not two but five countries; Iran, the Russian Federation, Turkmenistan, Azerbaijan and Kazakhstan (there is no multilateral treaty to that effect).

Dauletabad Gas Field: The most direct, the shortest and the least expensive route for Dauletabad’s natural gas to reach India is the Southern Corridor through Afghanistan and Pakistan. Afghanistan is arguably the most volatile of regions and India remains reluctant to rely on Pakistan for her supply of natural gas.

China has been looking at opening the Eastern Corridor building a pipeline from Dauletabad to Xinjiang (and an extension even into Japan). That’s some 4,000 miles to cover at a cost of over $10 billion. With existing technology Dauletabad-Xinjiang Pipeline is economically infeasible.

Getting gas from Dauletabad through Afghanistan to Pakistan and into India is also riddled with legal hurdles. The very first company that came up with the idea was The Bridas Group, an Argentine company. The Government of Turkmenistan commissioned Bridas to map the geology of a north-south pipeline. In 1995, the Benazir Government also granted construction rights to Bridas. In 1996, Bridas obtained a 30-year concession from the Rabbani Government to build an 875-mile gas pipeline.

By that time Unocal, the California based oil giant, had woken up. Unocal hired Henry Kissinger, Robert Oakley (one-time U.S. Ambassador to Pakistan), and Richard Armitage (the current deputy defense secretary) to do its lobbying. Both Benazir of Pakistan and Niyazoy of Turkmenistan were pressurised to break their deal with Bridas (for Unocal’s benefit). Bridas, in return, filed a suit with the International Chamber of Commerce and won.

South Pars Gas Field: The potential supplier is Iran and India is the potential consumer. In between the two comes Pakistani territory. Pakistan would want the pipeline to pass through her territory for her to earn a couple of hundred million dollars a year in transit fee. India is not too sure. Can India bypass Pakistan and still get her gas from South Pars? To be certain, more than 80% of the proposed pipeline will be over Iranian territory. To bypass Pakistan will be expensive.

To be sure, Iran is by far the biggest looser in the multi-billion dollar pipeline game. Iran’s anti-U.S. stance is costing 69 million Iranians a minimum of a few hundred million dollars a year in transit fees. The Baku-Tbilisi-Ceyhan Pipeline has already isolated Iran. Pakistan and Afghanistan are the next biggest losers. The prerequisite for the Dauletabad-Afghanistan-Pakistan-India Pipeline is a stable Afghanistan. That isn’t about to happen. The South Pars-Pakistan-India Pipeline is, however, ready to go. Only if India can repose trust in her ex-arch rival.