< http://www.feer.com > AFGHANISTAN No Big Win For Big Oil The oil companies that gave up on Afghanistan under Taliban rule will have to wait some time before they can make money there By Murray Hiebert/WASHINGTON
WHEN FORMER OILMAN George Bush sent the United States military into the Gulf War, many observers said that the primary U.S. interest in defending Kuwait was Kuwaiti oil. Likewise, as the U.S. pursued its campaign in Afghanistan, some sceptics speculated that one reason President George W. Bush was so keen to take down the Taliban along with Al Qaeda was to clear the way for an American-built oil pipeline. It was "a golden opportunity to expand American geopolitical influence into South and Central Asia, scene of the Caspian Basin oil boom," wrote Pakistan's Dawn newspaper.
In light of the September 11 attacks on the U.S., Bush's insistence that eradicating terrorism was its only motive sounded more credible. Nevertheless, the defeat of the Taliban has resurrected speculation about Afghanistan as a potentially attractive export route for Caspian gas and oil. But whatever their hopes for Afghanistan, oil companies stand to gain little in the short term from the American victory there.
Although it has none of its own oil, Afghanistan lies just south of three Central Asian countries where Western oil companies have been busy. In the mid-1990s, two oil firms, Unocal of the United States and Bridas of Argentina, negotiated with the Taliban to build a pipeline through Afghanistan linking the abundant supplies of gas from landlocked Turkmenistan to Pakistan-and possibly on to India. By 1998, these plans had unravelled.
Although a more business-friendly interim government has been installed in Kabul, industry experts say oil companies are unlikely to begin dusting off their earlier proposals any time soon. For starters, global oil and gas prices aren't high enough to attract investors, and the reconstruction of Afghanistan is still a long way off. On top of that, the resource-rich countries of Central Asia have developed alternative routes through which to export gas and oil, and Pakistan has found alternative sources of energy.
Unocal abandoned its project in 1998 after its negotiations with the Taliban had stalled and its relationship with Turkmenistan had unravelled. "We've moved on," says Unocal spokesman Barry Lane. "We've got plenty of other fish to fry."
Lane says the U.S. oil giant's original interest in the pipeline stemmed from its goal of providing gas to the potentially huge markets of Pakistan and India as these countries develop. "In the intervening years, Pakistan has developed its own resources for meeting internal gas demand," says Lane.
In addition, Central Asia has found alternative shipping routes. In the mid-1990s when the Afghan pipeline was conceived, Turkmenistan had no way to export its estimated 80 billion-cubic-metre supply of gas because of economic and political chaos in Russia, according to a recent report by Laurent Ruseckas of Cambridge Energy Research Associates. In the past two years, however, gas consumption in Russia has begun to grow while output in Siberia has dropped, prompting Moscow to import Turkmen gas, Ruseckas said.
KAZAKHSTAN SET UNTIL 2005 An oil pipeline from Kazakhstan was grafted onto the earlier Afghan gas pipeline proposal in an attempt to deliver oil from Central Asia through Pakistan to the port of Gwadar on the Indian Ocean. In the mid-1990s, Kazakhstan did not have an export route, but since 1999 Russia has incorporated its Central Asian neighbour into its Transneft system, allowing Kazakhstan to export up to 300,000 barrels per day, Ruseckas said. He estimated that the new Caspian Pipeline Consortium, led by BP and linking Kazakhstan to a new Russian port on the Black Sea, means that the Central Asia nation will not need another export route until at least 2005, when an Agip-led consortium opens up the giant Kashagan field.
Enthusiasm for an Afghan pipeline, costing $1 billion or more, also has been dented by the low international oil price, which fell more than 20% last year to about $18 a barrel. "Were there to be shortages and sustained high prices, any of these proposals might come back into play," says Frederick Starr of Johns Hopkins University's School for Advanced International Studies in Washington.
Afghanistan's political fragility and its devastated infrastructure further discourage potential investors. "People are pessimistic about big projects through Afghanistan until a new government process has become stable," says Martha Brill Olcott, a Carnegie Endowment Central Asia expert.
Industry analysts say the Afghan pipeline would only make economic sense if gas could be transported to the growing Indian market. But escalating tensions between India and Pakistan since the December 13 assault on the Indian parliament make it unlikely that India would hitch its economy to an energy source that Islamabad could easily cut off. Instead, India and Iran have talked about building a deep-water pipeline in the Gulf that would bypass Pakistan.
The U.S. government promoted the Afghan pipeline in the 1990s as an alternative to shipping Caspian oil through Iran to the Gulf. Despite increasing contacts between U.S. and Iranian officials since September 11, Washington has continued to brush aside calls for an Iran pipeline. But if U.S.-Iran relations warmed to the extent that Washington dropped its opposition to a transit route across Iran, the Afghan pipeline proposal would likely be one of the first casualties, analysts say.
Upstream, the Norwegian oil-and-gas publication, reported in late December that Gazprom of Russia was trying to revive the plan for a gas pipeline through Afghanistan and Pakistan to India. "The problem is Gazprom doesn't have the money," says Julia Nanay of the Petroleum Finance Company, an energy consulting group. "They need partners with deep pockets."
American officials still believe a Western-backed pipeline across Afghanistan makes sense in the long run. "The pipeline is one of those things out there in the future," argues a State Department official, who estimates that Afghanistan could earn $100 million-150 million a year in transit fees. "Something could happen in the next 10-15 years . . . once there's a stable government in Afghanistan, the business environment in India is more conducive and relations between India and Pakistan are more stable."