Unocal Testimony on U.S. Interests in Afghanistan
By John Maresca, Vice President, International Relations, Unocal Corp.

Unocal is one of the world's leading energy resource and project development companies. I congratulate [the House of Representatives' subcommittee] for focusing on Central Asia oil and gas reserves and their role in shaping U.S. policy. 
I would like to focus 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. 
The Caspian region contains tremendous untapped hydrocarbon reserves. 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% in only 15 years. If this occurs, the region would represent about 5% 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. 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. 
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. Russia is unlikely to absorb large new quantities of foreign oil. 
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 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 U.S. companies, Unocal, Amoco, Exxon and Pennzoil. This consortium conceives of two possible routes, one across the north Caucasus to Novo-rossiysk. The other to cross Georgia to the Black Sea. 
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 0.5% to perhaps 1.2% per year between 1995 and 2010. 
Asia's energy consumption will rapidly increase. Prior to the recent turbulence in the Asian Pacific economies, we at Unocal anticipated Asia'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. 
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 is how the energy resources of Central Asia can be made available to nearby Asian markets. One option is to go east across China, but such a pipeline would be more than 3,000 kilometers long, just to reach Central China. Then there would have to be a 2,000-kilometer connection to reach the main population centers along the coast. 
The second option is to build a pipeline from Central Asia to the Indian Ocean. One obvious route 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. It has been involved in bitter warfare for almost two decades, and is still divided by civil war. From the outset, we 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. 
Unocal foresees a pipeline that would become part of a regional system that will gather oil from existing pipeline infrastructure in Turkmen-istan, 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 pipeline will have a shipping capacity of one million barrels of oil per day. The estimated cost of the project 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. 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 Turkmen-istan directly across the Caspian Sea through Azerbaijan and Georgia to Turkey. 
Last October, the Central Asia Gas Pipeline Consortium (CentGas), in which Unocal holds an interest, was formed to develop a gas pipeline that will link Turkmenistan 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 Pakistan. The proposed extension would move gas to New Delhi and 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. The impact of these resources on U.S. commercial interests and U.S. foreign policy is 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. 
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 the crossroads it was in the past. 
On the question of Afghanistan, we're not in a phase where we are negotiating on a contract because there is no recognized government really to negotiate with. However, we have had talks and briefings with all the factions. It is clear that they all understand the significance for their country of this pipeline project and they all support it. All the factions would like it to start tomorrow if we could do it. 
It's not going to be built until there is a single Afghan government. Because of the financing situation, credits are not going to be available until there is a recognized government of Afghanistan. 
All wars end. I think that's a universal rule. So one of these days this war too will end. Then I believe the pipeline will be secure. 
We have the same relationship [the Taliban] as we have with the other factions. We have talked with them, we have briefed them, we have invited them to our headquarters to see what our projects are. 

Source: Testimony of John Maresca, "Hearing on U.S. Interests in the Central Asian Republics," House of Representatives, Subcommittee on Asia and the Pacific, Committee on International Relations, Washington, DC., February 12, 1998 <>