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The scramble for Central Asia’s black gold

Pipelines in the pipeline
Zafar Bangash

There are more than 200 billion barrels of proven oil reserves and perhaps 50 trillion cubic metres of gas in Central Asia and the Caspian Sea Basin. Such riches could keep the lights burning in the west for a long time. They also have the potential to turn the impoverished Muslim Republics into the future Arab sheikhdoms, though one hopes with a little more wisdom.

Central Asia and the Caucasus region’s problem is not geology but geography. All the States are landlocked. Their location on the Caspian Sea is not much help either in linking them to the outside world. They need the support of neighbouring countries and massive investment to build pipelines to export their vast reserves abroad.

Rich pickings could be made by those who get a pipeline out of there first. Western and Russian oil men are there in droves. They are offering fantastic deals which have little to do with reality, more with greed and the scramble to make quick bucks. The rush for Central Asia’s black gold is on in earnest.

On May 15, Turkish energy minister Recai Kutan announced in Ankara that three western companies - Italian Eni’s Snamprogetti, Gas de France and Shell - were interested in forming a consortium to build a 3,200 km pipeline to carry 28 to 30 billion cubic metres of gas from Turkmenstan’s Daulatabad field to Europe via Iran and Turkey. It will cost $1.6 billion. This came immediately after the leaders of Turkey, Iran and Turkmenstan had signed a protocol a day earlier in Ashgabat.

Two more deals were announced on May 16, one in Moscow and the other in Islamabad. Russian energy minister Boris Nemtsov signed a US$2 billion contract for the construction of a 940-mile pipeline from Kazakhstan to the Russian Black Sea oil port of Novorossiisk.

In Islamabad, Pakistan’s minister for petroleum and natural resources, Chaudhry Nisar Ali Khan, said that a task force comprising Pakistani and Turkmen experts had been established for the $2.5 billion, 1280 km gas pipeline from Daulatabad to Multan in Pakistan. The experts would meet first in Islamabad in early June and later in Ashgabat to finalise details for the pipeline construction.

Of the three proposed projects, the Turkmen-Pakistan gas pipeline can begin almost immediately if the fighting in Afghanistan subsides. Pre-feasibility work has already been completed. Two major consortiums - Bridas of Argentina and Unocal of the US/Delta of Saudi Arabia - are in the running to finance and construct the pipeline, to be laid through western Afghanistan.

Khan told the Islamabad news conference that it would take two years to complete the pipeline, designed to carry 20 billion cubic metres of gas a year. The field has proven reserves of 680 billion cum. He said Pakistan planned to intensify efforts to promote stability in Afghanistan to enable the gas project and others to go ahead.

Leaders of warring Afghan factions and ‘relevant countries’ - Iran, Tajikistan, Turkey, Uzbekistan - would be invited for peace talks in Pakistan, he said. No date for such a meeting has been set but Kabul’s Taliban rulers have indicated that they are willing to sign a deal with any company that would most benefit Afghanistan.

Khan also said that Pakistani and Turkmen leaders had signed a protocol during the Economic Cooperation Organisation (ECO) summit in Ashgabat (May 13-14) setting out a schedule for work to start on the pipeline.

In the meantime, discussions would continue on the formation of a consortium to undertake the project. ‘We hope that by October, all the aspects, all the problems, will be sorted out and work on the project should start before the end of the year,’ Khan said optimistically. He acknowledged, however, that if the fighting continued in Afghanistan, financing for the project would be a problem.

Pakistan’s energy needs are enormous. By the year 2010, it would face a shortfall of 8.3 billion cubic feet of gas. Quite aside from transportation revenues, the proposed pipeline can ensure supply of cheap gas from one of the world’s major gas fields.

Pakistan has also reached agreement on building an oil pipeline from Turkmenistan through Afghanistan to Pasni on Pakistan’s Arabian Sea coast and an oil terminal. The oil pipeline project would cost $2 billion and take 18 months to complete once construction begins. Pakistan would buy some of the oil and the rest could be exported, Khan said. Uzbekistan and Kazakhstan, seeking new outlets for their oil, have also agreed to join the project.

While Pakistan’s gas and oil pipeline dreams are predicated on the Taliban and their rivals coming to a reasonable agreement in Afghanistan, the Russian and Turkish pipelines have not even done their feasibility studies. Their environmental reports and rights of way agreements have not been sorted out, much less agreed upon and signed. Yet Chevron, the American oil company with a 15 percent stake in the Caspian Pipeline Consortium, hopes to begin construction by the beginning of 1998 and complete the project by September 1999.

There is clearly more dreaming than clear thinking involved here. The Russian pipeline is also hampered by lack of financing. But Russian energy minister Nemtsov is not deterred.

‘This is the biggest investment project in Russian history,’ he said after the signing ceremony with officials of the Caspian Pipeline Consortium, which will build the 940-mile pipeline. ‘The project is of the utmost importance to Russia. It will bring $23 billion to Russia (over 40 years), or more than 10 times the (government’s) total outstanding debt to pensioners,’ the Russian minister said.

The Caspian Pipeline Consortium, comprising eight companies and three governments, plans to transport about 560,000 barrels a day through the pipeline in the early stages, building volumes gradually to 1.34 million bpd by 2014. That is, if the various territories the pipeline will traverse, will be amenable to such a proposal.

Where there is oil and gas, there are clearly big dreams.

Muslimedia - June 1-15, 1997

Article from

Crescent International Vol. 26, No. 7

Muharram 25, 14181997-06-01

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