The Guardian October 24, 2001


Now you know...oil

On February 12, 1998 the US House of Representatives International 
Committee held a hearing on US interests in the Central Asian Republics. 
One of those to give evidence was a Mr John Maresca who is the Vice-
President for International Relations of the Unocal Corporation. Here are 
some excerpts from his statement before the US Committee:

* * *
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 congratulate you for focusing on Central Asian oil and gas reserves and the role they play in shaping US policy. 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 landlocked, both geographically and politically. Some [of the States] have unsettled wars or latent conflicts. Others have evolving systems where the laws and even the courts are dynamic and changing. A chief technical obstacle which we in the industry face in transporting oil is the region's existing pipeline infrastructure ... The key question 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 kilometres just to reach Central China. The question is, what will be the cost of transporting oil through this pipeline, and what would be the netback that the producers would receive. For those who are not familiar with the terminology, the netback is the price that the producer receives for his oil or gas at the wellhead after all the transportation costs have been deducted. 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 US 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 recognised government is in place that has the confidence of governments, lenders, and our company ...

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