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Globalization - Countries - Afghanistan

The Oil Connection:
Afghanistan and Caspian Sea oil pipeline routes

Source:  www.newhumanist.org

Don't think there is a connection between Afghanistan and the oil monopolies? Think again. The information contained in these partial Department of Energy reports are current as of September 2001.

You can read the complete texts at http://www.eia.doe.gov/emeu/cabs/caspian.html and http://www.eia.doe.gov/emeu/cabs/afghan.html. (For more links, also see http://www.mujahideen.fsnet.co.uk/afghanistan-oil.htm)

This story could be bigger than the Pentagon Papers if it were discovered that the "war on terrorism" were an excuse to end Afghanistan's civil war in order to secure the Southern route of an oil pipeline from the Caspian Sea through Afghanistan. In 1998, the Taliban signed an agreement to proceed with the pipeline, but the civil war has kept the project from getting started.


Afghanistan's significance from an energy standpoint stems from its geographical position as a potential transit route for oil and natural gas exports from Central Asia to the Arabian Sea.  This potential includes the possible construction of oil and natural gas export pipelines through Afghanistan, which was under serious consideration in the mid-1990s.  The idea has since been undermined by Afghanistan's instability.   Since 1996, most of Afghanistan has been controlled by the Taliban movement, which the United States does not recognize as the government of Afghanistan.

On December 19, 2000, the UN Security Council imposed additional sanctions against Afghanistan's ruling Taliban movement (which controls around 95% of the country), including an arms embargo and a ban on the sale of chemicals used in making heroin. These sanctions (Resolution 1333) are aimed at pressuring Afghanistan to turn over Osama bin Laden, suspected in various terrorist attacks, including the August 1998 US Embassy bombings in Kenya and Tanzania.  These latest sanctions are in addition to sanctions (Resolution 1267) imposed on Afghanistan in November 1999, which included a freeze on Taliban assets and a ban on international flights by Afghanistan's national airline, Ariana.  The Taliban reacted sharply to the new sanctions, ordering a boycott of US and Russian goods, and pulling out of UN-mediated peace talks aimed at ending the country's civil war.

On November 29, 1999, UN Secretary General Kofi Annan issued a report on Afghanistan which listed the country's major problems as follows: civil war (which has caused many casualties and refugees, and which has devastated the country's economy), record opium production, wide-scale human rights violations, and food shortages caused in part by drought.

According to the 2001 CIA World Factbook, Afghanistan is an extremely poor, landlocked country, highly dependent on farming and livestock raising.  Afghanistan has experienced over two decades of war, including the nearly 10-year Soviet military occupation (which ended in 1989). During that conflict one-third of the population fled the country, with Pakistan and Iran sheltering a combined peak of more than 6 million refugees.  Large Afghan refugee populations remain in Pakistan and Iran. Gross domestic product has fallen substantially over the past 20 years because of the loss of labor and capital and the disruption of trade and transport.  The severe drought of 1998-2000 added to these problems.  The majority of the population continues to suffer from insufficient food, clothing, housing, and medical care. Inflation remains a serious problem throughout the country. International aid can deal with only a fraction of the humanitarian problem, let alone promote economic development. The economic situation did not improve in 1999-2000, as internal civil strife has continued, hampering both domestic economic policies and international aid efforts. Numerical data are likely to be either unavailable or unreliable. Afghanistan was by far the largest world producer of opium poppies in 2000, and narcotics trafficking is a major source of revenues.

Energy Overview

The Soviets had estimated Afghanistan's proven and probable natural gas reserves at up to 5 trillion cubic feet (Tcf) in the 1970s.  Afghan natural gas production reached 275 million cubic feet per day (Mmcf/d) in the mid-1970s. However, due to declining reserves from producing fields, output gradually fell to about 220 Mmcf/d by 1980. At that time, the Jorquduq field was brought online and was expected to boost Afghan natural gas output to 385 Mmcf/d by the early 1980s. However, sabotage of infrastructure by the anti-Soviet mujaheddin fighters limited the country's total production to 290 Mmcf/d, an output level that was held fairly steady until the Soviet withdrawal in 1989. After the Soviet pullout and subsequent Afghan civil war, roughly 31 producing wells at Sheberghan area fields were shut in pending the restart of natural gas sales to the former Soviet Union.

At its peak in the late 1970s, Afghanistan supplied 70%-90% of its natural gas output to the Soviet Union's natural gas grid via a link through Uzbekistan. In 1992, Afghan President Najibullah indicated that a new natural gas sales agreement with Russia was in progress. However, several former Soviet republics raised price and distribution issues and negotiations stalled. In the early 1990s, Afghanistan also discussed possible natural gas supply arrangements with Hungary, Czechoslovakia, and several Western European countries, but these talks never progressed further.  Afghan natural gas fields include Jorqaduq, Khowaja Gogerdak, and Yatimtaq, all of which are located within 20 miles of the northern town of Sheberghan in Jowzjan province.  Natural gas production and distribution is the responsibility of the Taliban-controlled Afghan Gas Enterprise.   In 1999, work resumed on the repair of a distribution pipeline to Mazar-i-Sharif.   Spur pipelines to a small power plant and fertilizer plant also were repaired and completed.  Mazar-i-Sharif is now receiving natural gas from the pipeline, as well as some other surrounding areas.  Rehabilitation of damaged natural gas wells has been undertaken at the Khowaja Gogerak field, which has increased natural gas production.

In February 1998, the Taliban announced plans to revive the Afghan National Oil Company, which was abolished by the Soviet Union after it invaded Afghanistan in 1979.   Soviet estimates from the late 1970s placed Afghanistan's proven and probable oil and condensate reserves at 95 million barrels. Oil exploration and development work as well as plans to build a 10,000-bbl/d refinery were halted after the 1979 Soviet invasion.   A very small amount of crude oil is produced at the Angot field in the northern Sar-i-Pol province.  It is processed at a primitive topping plant in Sheberghan, and burned in central heating boilers in Sheberghan, Mazar-i-Sharif, and Kabul.  Another small oilfield at Zomrad Sai near Sheberghan was reportedly undergoing repairs in mid-2001.

Petroleum products such as diesel, gasoline, and jet fuel are imported, mainly from Pakistan and Turkmenistan.  A small storage and distribution facility exists in Jalalabad on the highway between Kabul and Peshawar, Pakistan.  Turkmenistan also has a petroleum product storage and distribution facility at Tagtabazar near the Afghan border, which supplies northwestern Afghanistan.

Besides oil and natural gas, Afghanistan also is estimated to have 73 million tons of coal reserves, most of which is located in the region between Herat and Badashkan in the northern part of the country. Although Afghanistan produced over 100,000 short tons of coal annually as late as the early 1990s, as of 1999, the country was producing only around 1,000 short tons.

Afghanistan's power grid has been severely damaged by years of war. Currently, the ruling Taliban are concentrating on rebuilding damaged hydroelectric plants, power distribution lines, and high-voltage cables.  Production of power by Afghanistan's hydroelectric dams was negatively affected by the drought of 1998-2000, resulting in blackouts in Kabul and other cities.  Increased rainfall in 2001 has improved power production.  The Kajaki Dam in Helmand province near Kandahar is undergoing the addition of another generating turbine with assistance from the Chinese Dongfeng Agricultural Machinery Company.  This will add 16.5 megawatts (MW) to its generating capacity when completed.  Transmission lines from the Kajaki Dam to Kandahar were repaired in early 2001, along with a substation in the city, restoring supplies of electricity.  The Dahla Dam in Kandahar province also has been restored to operation, along with the Breshna-Kot Dam in Nangarhar province, which has a generating capacity of 11.5 MW.  The 66-MW Mahipar hydro plant also is now operational.

Turkmenistan supplies electricity to much of northwestern Afghanistan.  In October 1999, Afghanistan announced that it had reached agreement with Turkmenistan for electricity imports into northwestern Afghanistan, including power to the city of Herat and the Herat cement plant.  Another transmission line has been built from Turkmenistan to the city of Andkhoy, and one was under construction in 2001 to Sheberghan.   Electricity has previously been imported from Uzbekistan for Mazar-i-Sharif, but supplies were cut off during the winter of 1999 due to payment arrears.

Regional Pipeline Plans

In January 1998, the Taliban signed an agreement that would allow a proposed 890-mile, $2-billion, 1.9-billion-cubic-feet-per-day natural gas pipeline project led by Unocal to proceed. The proposed pipeline would have transported natural gas from Turkmenistan's 45-Tcf Dauletabad natural gas field to Pakistan, and most likely would have run from Dauletabad south to the Afghan border and through Herat and Qandahar in Afghanistan, to Quetta, Pakistan. The line would then have linked with Pakistan's natural gas grid at Sui. Natural gas shipments had been projected to start at 700 Mmcf/d in 1999 and to rise to 1.4 Bcf/d or higher by 2002. In March 1998, however, Unocal announced a delay in finalizing project details due to Afghanistan's continuing civil war. In June 1998, Gazprom announced that it was relinquishing its 10% stake in the gas pipeline project consortium (known as the Central Asian Gas Pipeline Ltd., or Centgas), which was formed in August 1996. As of June 1998, Unocal and Saudi Arabia's Delta Oil held a combined 85% stake in Centgas, while Turkmenrusgas owned 5%. Other participants in the proposed project besides Delta Oil include the Crescent Group of Pakistan, Gazprom of Russia, Hyundai Engineering & Construction Company of South Korea, Inpex and Itochu of Japan

On December 8, 1998, Unocal announced that it was withdrawing from the Centgas consortium, citing low oil prices and turmoil in Afghanistan as making the pipeline project uneconomical and too risky. Unocal's announcement followed an earlier statement -- in August 1998 -- that the company was suspending its role in the Afghanistan gas pipeline project in light of the recent U.S. government military action in Afghanistan, and also due to intensified fighting between the Taliban and opposition groups. Unocal had previously stressed that the Centgas pipeline project would not proceed until an internationally recognized government was in place in Afghanistan. To date, however, only three countries -- Saudi Arabia, Pakistan and the United Arab Emirates -- have recognized the Taliban government.

Besides the gas pipeline, Unocal also had considered building a 1,000-mile, 1-million barrel-per-day (bbl/d) capacity oil pipeline that would link Chardzou, Turkmenistan to Pakistan's Arabian Sea Coast via Afghanistan. Since the Chardzou refinery is already linked to Russia's Western Siberian oil fields, this line could provide a possible alternative export route for regional oil production from the Caspian Sea. The $2.5-billion pipeline is known as the Central Asian Oil Pipeline Project. For a variety of reasons, including high political risk and security concerns, however, financing for this project remains highly uncertain.

In April 1999, Pakistan, Turkmenistan and the Taliban authorities in Afghanistan agreed to reactivate the Turkmenistan-Pakistan gas pipeline project, and to ask the Centgas consortium, now led by Saudi Arabia's Delta Oil (following Unocal's withdrawal from the project), to proceed.  Periodic meetings to discuss the project have continued.   It remains unlikely, however, that this pipeline will be built.


Possible Caspian Oil Routes


There are several Caspian region gas export pipelines that have been proposed. Although there is no lack of export option proposals, questions remain as to where all these exports should go.


The TRACECA Program (Transport System Europe-Caucasus-Asia, informally known as the Great Silk Road) was launched at a European Union (EU) conference in 1993. The EU conference brought together trade and transport ministers from the Central Asian and Caucasian republics to initiate a transport corridor on an West-East axis from Europe, across the Black Sea, through the Caucasus and the Caspian Sea to Central Asia. In September 1998, twelve countries (including Azerbaijan, Bulgaria, Kazakhstan, Romania, Turkey, and Uzbekistan) signed a multilateral agreement known as the Baku Declaration to develop the transport corridor through closer economic integration of member countries, rehabilitation and development of new transportation infrastructure, and by fostering stability and trust in the region. In addition, the EU has sponsored the INOGATE program, which appraises oil and gas exports routes from Central Asia and the Caspian, and routes for shipping energy to Europe. INOGATE is run through the EU's TACIS program.


However, there is some question as to whether Europe is the right destination for Caspian oil and gas. Oil demand over the next 10-15 years in Europe is expected to grow by little more than 1 million bbl/d. Oil exports eastward, on the other hand, could serve Asian markets, where demand for oil is expected to grow by 10 million bbl/d over the next 10-15 years. To feed this Asian demand, though, would necessitate building the world's longest pipelines. Geographical considerations would force these pipelines to head north of the impassable mountains of Kyrgyzstan and Tajikistan across the vast, desolate Kazakh steppe, thereby adding even more length (and cost) to any eastward pipelines.


An additional way for Caspian region exporters to supply Asian demand would be to pipe oil and gas south. This would mean sending oil and gas through either Afghanistan or Iran. The Afghanistan option, which Turkmenistan has been promoting, would entail building oil and gas pipelines across war-torn Afghan territory to reach markets in Pakistan and possibly India. The Iranian route for gas would pipe Caspian region gas (from Azerbaijan, Uzbekistan, and Turkmenistan) to Iran's southern coast, then eastward to Pakistan, while the oil route would take oil to the Persian Gulf, then load it onto tankers for further trans-shipment. However, any significant investment in Iran would be problematic under the Iran and Libya Sanctions Act, which imposes sanctions on non-U.S. companies investing in the Iranian oil and gas sectors. U.S. companies already are prohibited from conducting business with Iran under U.S. law.

North or Northwest?

For its part, Russia itself has proposed multiple pipeline routes that utilize Russian export pipelines that transport oil to new export outlets being developed on the Baltic and Mediterranean Seas. Russia is set to complete its Baltic Sea port at Primorsk later this year, and the country is working with Croatia to connect the Adria pipeline with the southern Druzhba pipeline. Reversing the flows in the Adria pipeline and tying it to the southern Druzhba route would allow oil exports from the Caspian to run via Russia's pipeline system, across Ukraine and Hungary, and then terminate at the Croatian deep-sea Adriatic port of Omisalj. In addition, Russia already has the most extensive natural gas network in the region, and the system's capacity could be increased to allow for additional Caspian region gas exports via Russia.

However, there are political and security questions as to whether the newly independent states of the former Soviet Union should rely on Russia (or any other country) as their sole export outlet, and Caspian region producers have expressed their desire to diversify their export options. In addition, most of the existing Russian oil export pipelines terminate at the Russian Black Sea port of Novorossiisk, requiring tankers to transit the Black Sea and pass through the Bosporus Straits in order to gain access to the Mediterranean and world markets. Turkey has raised concerns about the ability of the Bosporus Straits, already a major chokepoint for oil tankers, to handle additional tanker traffic. Already, Turkey has stated its environmental concerns about a possible collision (and ensuing oil spill) in the Straits as a result of increased tanker traffic from the launch of the Caspian Pipeline Consortium's (CPC) Tengiz-Novorossiisk pipeline in March 2001. The first tanker with CPC oil is not scheduled to be loaded at Novorossiisk until August 6, 2001, but already there are a number of options under consideration for oil transiting the Black Sea to bypass the Bosporus Straits.

Regional Conflict

In almost any direction, Caspian region export pipelines may be subject to regional conflict, an additional complication in determining final routes. The Uzbek government is dealing with the threat of rising Islamic fundamentalism in Uzbekistan, Afghanistan remains scarred by over 20 years of war, the Azerbaijan-Armenia war over the Armenian-populated Nagorno-Karabakh enclave in Azerbaijan has yet to be resolved, separatist conflicts in Abkhazia and Ossetia in Georgia flared in the mid-1990's, and Russia's war with Chechnya has devastated the region around Grozny in southern Russia.

Nevertheless, several export pipelines from the Caspian region already are completed or under construction, and Caspian region exports are already transiting the Caucasus. While the hope is that export pipelines will provide an economic boost to the region, thereby bringing peace and prosperity to the troubled Caucasus and Caspian regions in the long run, the fear is that in the short-term, the fierce competition over pipeline routes and export options will lead to greater instability.


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