BOLIVIA: Government can not fill contracts after raising taxes on foreign firms





Bolivia in bind with gas policy
President Evo Morales "nationalized" the country's crucial natural gas industry last year by forcing foreign companies to accept new contracts and pay sharply higher taxes.

The industry has gone along without public protest, but it has made a statement with dwindling exploration budgets.

Now it appears the Bolivian government has a problem: It has orders for more natural gas than it's able to produce. At the end of August, the Bolivian energy ministry announced it curtailed supplies to two major customers so it could ship more gas to Brazil to fulfill a contract there.

"The government is in a bind," said Carlos Miranda, a former Bolivian energy secretary who now consults for private companies.

The source of this difficulty is that spending on exploration and production has sunk from $604 million in 1998, to to $198 million in 2006, according to Carlos Alberto López, also a former energy secretary who now consults for the gas industry. Now Morales is demanding that the companies reverse themselves or face expulsion.

Bolivian Vice President Alvaro García Linera said the companies have to put up more money or face the loss of their contracts.

"They want to earn extraordinary profits," García said. "That won't happen anymore in Bolivia.

"If they don't want to invest, we need to know. Other companies want to invest. The rules are clear. For the first time, we have contracts approved by Congress."

Bolivia has been banking on rising revenues from its enormous gas reserves.

Morales has begun to spend the money from higher taxes on gas production to build roads, schools and health clinics in a country that is the poorest in South America. Producing more gas would provide much-needed money to develop Bolivia, and fill the growing energy needs of neighboring countries. Several years ago, when the foreign gas companies were investing heavily in gas exploration here, it appeared that Bolivia could meet the energy needs of Brazil, Argentina, Chile, Uruguay and Paraguay. It drew international players, including Petrobras, Repsol YPF, British Gas, BP and Total to explore here.

But now, with doubts about future supplies from Bolivia, Brazil and Chile are looking into spending hundreds of millions of dollars to build LNG re-gasification plants that would allow them to import liquefied natural gas brought by tankers to meet their growing needs.

"The policies in Bolivia are starting to backfire," said Sophie Aldebert, a Brazil-based analyst with Cambridge Energy Research Associates. "Bolivia is losing potential markets."

Bolivia's production problems have also imperiled a $2.5 billion project that would more than quadruple exports to northern Argentina by 2010. Argentina is now considering whether to build an LNG import terminal near Buenos Aires with Venezuela's help.

Decline in drilling

Morales, who took office in 2006, won the presidency by tapping into the long-held suspicion of foreign companies.

His move to "nationalize" the holdings of international energy companies was a wildly popular decision.

It wasn't the traditional nationalization since he didn't take over the companies. Instead, he forced them to accept new contracts and an increase in taxes and royalties from a total of 50 percent to 82 percent.

Morales won his battle but now needs to find a way to bring back drilling.

Petroleo Brasileiro, a private-public company better known as Petrobras, announced recently that it was scrapping plans to build a $1.3 billion petrochemical plant in Bolivia that would have used locally produced natural gas.

And Petrobras has shown no interest in accepting the government's offer to drill for more gas in a partnership that would be 60 percent owned by the Bolivian state energy company, YPFB.

Officials with Petrobras have declined to talk about those decisions, as did Repsol YPF.

Investment by all of the gas companies is expected to drop again in 2007, said Miranda, the former Bolivian energy secretary. He said the companies are doing the bare minimum to keep from losing the contracts.

Growing demand

Bolivia's problems became clear when the government announced on Aug. 31 that it would halve its gas exports to Argentina and cut off deliveries to two large Brazilian power plants so that it could supply more gas to Brazil on a higher-priority contact.

It also needs more gas to meet the needs of Bolivia, where demand is rising 12 percent per year.

Looking ahead, Bolivia has two deals that would require it to expand its exports by 36 million cubic meters of gas per day by 2010.

But companies operating in Bolivia need to find the gas. As a result of the August ultimatum, Bolivian Energy Minister Carlos Villegas recently announced that over the next year, companies here plan to spend $254 million to find and produce gas. Independent analysts say that figure is exaggerated and have been unable to confirm the numbers.

"The companies will continue to put more emphasis on squeezing as much as possible out of their existing investments/fields than on new exploration in the next year," said López, who noted only three drilling rigs are active in Bolivia.

Russia and Iran?

One option for Bolivia is to bring in new companies.

Gazprom, Russia's state energy company, has been sniffing around Bolivia.

Last week Iranian President Mahmoud Ahmadinejad pledged to help Bolivia develop its natural gas reserves but offered few details.

And Petróleos de Venezuela, the state energy company better known as PDVSA, has announced it will invest heavily in Bolivia to increase production.




Via: Chron| by TYLER BRIDGES

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MIDDLE EAST: Kuwait approves Middle East's biggest refinery

Kuwait's top energy council has approved plans to build a 615,000 barrels per day refinery, the Middle East's biggest, after months of delays due to spiralling construction costs.  Kuna said the Supreme Petroleum Council had approved government plans to set up the country's fourth refinery.  In July, state oil refiner Kuwait National Petroleum Company (KNPC) had increased the budget for the Al Zour refinery to about $14 billion, more than twice the original cost estimate.  Rapidly rising costs in the energy industry have hit budgets and delayed refinery projects in the Middle East.  The GCC state cancelled a first tender for the refinery in February, after bids came in far above its initial budget. Local media said some bids had reached as much as $15 billion.  A new tender was launched and KNPC said in July around 30 companies had made preliminary bids. According to media reports, French firm Technip, US companies KBR, Bechtel and Foster Wheeler and Italy's Snamprogetti submitted pre-qualification bids.  KNPC plans to complete construction of the refinery by the end of 2011, a year later than the original schedule.  At 615,000 bpd, Al Zour would exceed the capacity of the Middle East's largest refinery, Saudi Arabia's 550,000 bpd Ras Tanura plant. Saudi Arabia plans to build another 400,000 bpd refinery in Ras Tanura.  Kuwait has yet to appoint a new oil minister after Sheikh Ali Al Jarrah Al Sabah resigned in June to avert a no-confidence vote against him in parliament.  Water and Electricity Minister Mohammad Al Olaim has been acting oil minister since Sheikh Ali's resignation. Kuwait sits on around 10 per cent of the world's oil reserves. It produced 2.41 million barrels per day of crude in August, according to a survey.


Kuwait's top energy council has approved plans to build a 615,000 barrels per day refinery, the Middle East's biggest, after months of delays due to spiralling construction costs.

Kuna said the Supreme Petroleum Council had approved government plans to set up the country's fourth refinery.

In July, state oil refiner Kuwait National Petroleum Company (KNPC) had increased the budget for the Al Zour refinery to about $14 billion, more than twice the original cost estimate.

Rapidly rising costs in the energy industry have hit budgets and delayed refinery projects in the Middle East.

The GCC state cancelled a first tender for the refinery in February, after bids came in far above its initial budget. Local media said some bids had reached as much as $15 billion.

A new tender was launched and KNPC said in July around 30 companies had made preliminary bids. According to media reports, French firm Technip, US companies KBR, Bechtel and Foster Wheeler and Italy's Snamprogetti submitted pre-qualification bids.

KNPC plans to complete construction of the refinery by the end of 2011, a year later than the original schedule.

At 615,000 bpd, Al Zour would exceed the capacity of the Middle East's largest refinery, Saudi Arabia's 550,000 bpd Ras Tanura plant. Saudi Arabia plans to build another 400,000 bpd refinery in Ras Tanura.

Kuwait has yet to appoint a new oil minister after Sheikh Ali Al Jarrah Al Sabah resigned in June to avert a no-confidence vote against him in parliament.

Water and Electricity Minister Mohammad Al Olaim has been acting oil minister since Sheikh Ali's resignation. Kuwait sits on around 10 per cent of the world's oil reserves. It produced 2.41 million barrels per day of crude in August, according to a survey.


Via: Reuters
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FRANCE: Unions to Discuss Possible French Job Cuts of Royal Dutch Shell

Total SA, Europe's third-largest oil company, plans to meet union workers at its French marketing unit next week to discuss a reorganization that may include job cuts, said two people with knowledge of the talks.  The number of positions that may be eliminated isn't known, said the people, who declined to be identified because the discussions aren't public.  Total last month reported second-quarter net income was little changed at 3.41 billion euros ($4.9 billion), partly because of lower refinery output. The Paris-based company said net adjusted operating income at the downstream division, which includes marketing and refining, fell 4 percent.  Sandra Dante, a spokeswoman for Total in Paris, said a meeting with union representatives is scheduled for Oct. 4. She declined to comment on the possibility of job cuts or the planned discussions.  The marketing division in France employs about 1,500 workers, Dante said.  Total shares today lost 0.8 percent to 57.02 euros in Paris trading. The stock is up 4.3 percent this year, less than the 13 percent gain by Royal Dutch Shell Plc, Europe's biggest oil company. BP Plc is the region's second largest.


Total SA, Europe's third-largest oil company, plans to meet union workers at its French marketing unit next week to discuss a reorganization that may include job cuts, said two people with knowledge of the talks.

The number of positions that may be eliminated isn't known, said the people, who declined to be identified because the discussions aren't public.

Total last month reported second-quarter net income was little changed at 3.41 billion euros ($4.9 billion), partly because of lower refinery output. The Paris-based company said net adjusted operating income at the downstream division, which includes marketing and refining, fell 4 percent.

Sandra Dante, a spokeswoman for Total in Paris, said a meeting with union representatives is scheduled for Oct. 4. She declined to comment on the possibility of job cuts or the planned discussions.

The marketing division in France employs about 1,500 workers, Dante said.

Total shares today lost 0.8 percent to 57.02 euros in Paris trading. The stock is up 4.3 percent this year, less than the 13 percent gain by Royal Dutch Shell Plc, Europe's biggest oil company. BP Plc is the region's second largest.



Via: Bloomberg|by Tara Patel
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MIDDLE EAST: The Yomhūrī-ye Eslāmī-ye Īrān announces new natural gas reserves




Iran has discovered in-place reserves of 11.4 trillion cubic feet of sweet gas in a southern field, a senior official was quoted as saying.

Mahmoud Mohaddes, head of exploration of the National Iranian Oil Company, said the Sefid Zakhour field in Fars province would have a daily production capacity of more than 1.15 billion cubic feet once it had been developed, state television said.

He predicted 17 wells would be needed for the field, the report said. Recoverable reserves are lower than in-place estimates.

Iran has the world's second-largest gas reserves after Russia. Sanctions, politics and construction delays have slowed its gas development, and analysts say Iran is unlikely to become a major exporter for a decade.


Via: Reuters
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EUROPA: Ukraine and Germany intensify cooperation in power engineering

Ukraine and Germany have agreed to intensify cooperation in managing renewal energy sources and energy saving. As a REGNUM correspondent in Kiev informs, such agreements were achieved yesterday after talks of the Ukrainian fuel and energy minister, Yuri Boyko, and German economy and technology minister, Michael Glos.

The German minister informed that Germany was ready to share all its technologies and experience with Ukraine within work groups that would be working under joint projects.

Yuri Boyko added that today the cooperation with Germany in power engineering is carried out within four projects: Germany presents a project of readjustment of Alchevsk communal heating system, works on construction of two energy blocks at Tripolsky and Zmiyev thermoelectric power stations; it also works on attracting German investments and financial resources to implement joint projects in Ukraine and Ukraine providing energy carriers transportation to Germany. “Our cooperation is developing dynamically in the frameworks of a high-ranking group between Ukraine and Germany,” Boyko said.

Speaking on further projects with German partners, Boyko said: “An investment forum is planned to be held here and a metallurgist symposium in Dusseldorf.” “All these things are down-to-earth, concrete, and we comprehend what we want to get from the German side like our partners from Germany know what they want to get from Ukraine. Here our interests are coinciding,” Yuri Boyko concluded.





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UNITED KINGDOM: The hunting for new British Petroleum chairman


BP has launched a search for a new chairman in a move that will draw a line under the turmoil that has engulfed the British oil giant for two years.

BP, which has a market value of £107 billion, has appointed a headhunter to find a replacement for Peter Sutherland, who has chaired the company for the past decade. Anna Mann, doyenne of British headhunting, will conduct the international search.

The company has been rocked by a series of disasters. It faces lawsuits over an explosion at a Texas oil refinery in 2005 which killed 15 people. It has been attacked for lax safety standards in Alaska and for missing production targets. On top of this, its former chief executive, Lord Browne, was forced out earlier this year after admitting he lied in a court case. He has been succeeded by Tony Hayward.

These events severely damaged the reputation of the company, once seen as a model of British corporate governance.

Company sources insist Sutherland will not step down until his retirement date of 2009. However, others say the handover could happen within a year if a suitable candidate is identified.

The appointment of headhunters at this stage will be seen by many as a move to satisfy the appetite among some shareholders for a fresh start at the top. They also want a chairman who has a close knowledge of the day-to-day workings of a global oil giant.

One analyst said: “What they need is someone who can provide air cover to Hayward while he reshapes the structure of the company and tackles the opera-tional shortcomings.”

The search is being conducted internally by BP’s deputy chairman, Sir Ian Prosser. The internal frontrunner is thought to be Sir William Castell, one of Britain’s most senior industrialists.

Castell made his name in the City by transforming Amersham, a diagnostics firm, which he sold three years ago to America’s General Electric for almost £6 billion.

He then became one of the top directors at General Electric, a rare feat for a British businessman. He was appointed a nonexecutive director of BP in July last year.

Possible outsiders to take over from Sutherland include Sir John Parker, who is chairman of National Grid, and Sir Nigel Rudd, former chairman of Alliance Boots.

Sutherland, 61, originally joined BP’s board as a nonexecutive in 1990 and served for three years. He rejoined in 1995 and was appointed chairman two years later.

During Sutherland’s tenure, BP’s market value has soared from £20 billion to more than £100 billion. The seemingly unbeatable combination of Sutherland and Browne not only changed the nature of BP, then reliant on the North Sea and Alaska, but was also credited with modernising both the culture of the company and the image of the industry. But the two clashed last year when Browne, who at the time was dubbed the Sun King, carried out a public campaign to secure an extension to his contract beyond his 60th birthday.

The move backfired and split the BP board. Browne was later forced to accept a compromise deal.

Following his resignation, some leading shareholders suggested that it was time for a clean sweep of BP’s management, but agreed that it would be too desta-bilising for the company to lose both Sutherland and Browne.

Last week BP faced fresh embarrassment when a memo prepared for staff by Hayward was leaked. It included a blunt warning to staff that third-quarter revenues would be “dreadful”.

Hayward said that BP’s financial performance was at its lowest since 1992-93.

Mann, who has had a long relationship with BP, founded Whitehead Mann with her husband more than 30 years ago.

They built it into one of Britain’s biggest headhunters, but she left three years ago. One of her last searches for the company led to the ill-fated nomination of BP’s Prosser as chairman of J Sainsbury. Institutional pressure led to Prosser’s humiliating withdrawal. It has emerged that Browne has signed a deal with Ed Victor, a London literary agent, to write a book. With a working title, The Nobility of Business, it is understood to be a wide-ranging look at the history of business and “a celebration of capitalism”, said Victor.


Via: The Sunday Times |by ,,,,,,,,,,,,,,



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IRAN - PAKISTAN: We are signing gas deal

Iran will sign a multi-billion dollar gas pipeline deal with Pakistan in the absence of India by the end of October, a top Iranian oil official said on Saturday.

"The peace pipeline contract ... will be ready to sign by the end of October," Hojatollah Ghanimi-Fard, Iran's representative to the talks, told the oil ministry's news service Shana.

Indian officials have been absent from the talks over the so-called "peace pipeline" between Iranian and Pakistani officials to finalise the long-delayed deal, which would see Iranian gas sent to Pakistan and to India via Pakistan.

"It was agreed that the price be calculated according to the current gas market standards," Ghanimi-Fard was quoted as saying by the state IRNA news agency.

"Pakistan asked for 60 million cubic metres per day, 30 million of which was approved," he said.

"All issues of disagreement were studied again and all points have been finalized," he said, adding the final meeting will be held in Pakistan in mid-October to "study the text of the contract to see if it does not contradict agreements."

Ghanimi-Fard said India was welcome to join the contract "whenever this country's problems are resolved and it will be a tripartite deal."

An Iranain official said earlier this week that India was not taking part in the discussions because it had yet to finalise a deal with Pakistan over the cost of transit across its neighbour's territory.

Discussions on the 7.4-billion-dollar project started in 1994, but have been held up by technical and commercial issues.

There have also been strong objections to the pipeline from the United States -- a key friend of Pakistan and an ever closer ally of India -- which is at loggerheads with Iran over its contested nuclear programme.

The 2,600-kilometre (1,600-mile) pipeline from Iran's giant South Pars gas field would initially carry around 60 million standard cubic metres (2.2 billion cubic feet) of gas per day.

Iran has the world's second largest gas reserves after Russia but until now has remained a relatively minor player in the global export market.

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MIDDLE EAST: Iran and Pakistan finalize deal on gas pipeline


Iran and Pakistan have finalized a deal on gas pipeline project and agreed to sign draft agreement and a letter of understanding by the end of October, Iranian representative said on Saturday.

Iranian Oil Minister's special representative Hojjatollah Ghanimifard said that both countries have reached consensus on all conditions of the deal, and the draft agreement is ready to be signed by lawyers and experts of different technical, financial and commercial sectors.

The Iranian and Pakistani representatives have settled differences on the deal during four-day negotiations which lasted until Friday night.

Ghanimifard said, "According to the negotiations, the Pakistani side is to submit the draft agreement to us next week, and we will declare our views on it in a week." He noted that the last round of the discussions will be held in Pakistan mid October, adding that the two sides will explore the draft agreement not to be contrary with the MoU already signed by the leaders of the countries parties to the project.

Given India is a party to the project, he said, "Iran welcomes India whenever it joins us in the peace pipeline project." According to the initial agreements in 1990, the project was to be carried out by Tehran, Islamabad and New Delhi to transfer Iranian natural gas to India through Pakistan.

The 2,600 km pipeline would carry 60 and 90 million cubic meters of gas a day to Pakistan and India respectively, and the expenditure of the piping project is estimated at about dlrs seven billion.



Via: Islamic Republic News Agency
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ASIA: Better relation INDIA ALGERIA, LNG supply contract to be signed with Algeria

Stating that international crude oil prices had risen to an unprecedented level of $82 a barrel that could have a major impact on the developing economies, India on Friday asked the nations of Organisation of the Petroleum Exporting Countries (OPEC) to enhance production in order to check the skyrocketing of prices.

“The continued rise in prices of crude oil at the international level was disturbing. Crude oil prices have touched $82 a barrel which was too high for developing nations to absorb the impact on a sustained basis. The only feasible alternative is that the Organisation of the Petroleum Exporting Countries nations should enhance crude oil production so that disruptions do not take place in crude supplies in order to dissuade oil starved nations like India to look for substitutes for fossil fuel,” Planning Commission Member, Kirit S. Parikh, who is part of the Energy Co-ordination Committee headed by the Prime Minister, said while inaugurating the tenth energy summit on oil and gas organised by the Associated Chambers of Commerce and Industry (Assocham) here.

He said such developments would force the oil starved nations to intensify their campaign to find crude oil substitutes on a war footing, consequences of which would be averse to Organisation of the Petroleum Exporting Countries’s interests.

With the current trend of rising prices, he said, India’s dependence on crude oil imports would increase to between 90 per cent and 95 per cent from nearly 70 per cent now.

Mr. Parikh urged the domestic oil producing companies to push up their exploration efforts for discovery of oil and gas by optimally exploiting marginal fields and blocs offered under the stipulations of New Exploration and Licensing Policy.

Speaking on the occasion, Algeria’s Ambassador to India, Noureddine Bardad-Daidj, said that Petronet LNG would shortly sign a long-term contract for importing 1.25 million tonnes of LNG annually for 25 years.

Stating that international crude oil prices had risen to an unprecedented level of $82 a barrel that could have a major impact on the developing economies, India on Friday asked the nations of Organisation of the Petroleum Exporting Countries (OPEC) to enhance production in order to check the skyrocketing of prices.  “The continued rise in prices of crude oil at the international level was disturbing. Crude oil prices have touched $82 a barrel which was too high for developing nations to absorb the impact on a sustained basis. The only feasible alternative is that the Organisation of the Petroleum Exporting Countries nations should enhance crude oil production so that disruptions do not take place in crude supplies in order to dissuade oil starved nations like India to look for substitutes for fossil fuel,” Planning Commission Member, Kirit S. Parikh, who is part of the Energy Co-ordination Committee headed by the Prime Minister, said while inaugurating the tenth energy summit on oil and gas organised by the Associated Chambers of Commerce and Industry (Assocham) here.  He said such developments would force the oil starved nations to intensify their campaign to find crude oil substitutes on a war footing, consequences of which would be averse to Organisation of the Petroleum Exporting Countries’s interests.  With the current trend of rising prices, he said, India’s dependence on crude oil imports would increase to between 90 per cent and 95 per cent from nearly 70 per cent now.  Mr. Parikh urged the domestic oil producing companies to push up their exploration efforts for discovery of oil and gas by optimally exploiting marginal fields and blocs offered under the stipulations of New Exploration and Licensing Policy.  Speaking on the occasion, Algeria’s Ambassador to India, Noureddine Bardad-Daidj, said that Petronet LNG would shortly sign a long-term contract for importing 1.25 million tonnes of LNG annually for 25 years. Via: The Hindu
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ASIA: Free Trade Agreement Between India and China?

China and India have started to talk in terms of a Free Trade Agreement, which would mean a giant stride in the relationship between the two countries. Officials of the two nations are scheduled to meet in New Delhi next month to work out some of the modalities that would pave the way for serious negotiations on the proposed Free Trade Agreement.  China's ministry of commerce has announced that officials of the two sides have made important progress in jointly studying the feasibility of initiating a regional trade arrangement.  The announcement came after two days of consultations, which resulted in a basic agreement on measures needed to facilitate agreements concerning cargo and service trade and investment, ministry spokesman Wang Xinpei said.  The process of joint research would be concluded at the next meeting in October. The two countries have been involved in joint research on the subject since March 2006. Once the research in concluded, the two sides will decide whether it was time to start negotiations on a free trade agreement, Wang said.



China and India have started to talk in terms of a Free Trade Agreement, which would mean a giant stride in the relationship between the two countries. Officials of the two nations are scheduled to meet in New Delhi next month to work out some of the modalities that would pave the way for serious negotiations on the proposed Free Trade Agreement.

China's ministry of commerce has announced that officials of the two sides have made important progress in jointly studying the feasibility of initiating a regional trade arrangement.

The announcement came after two days of consultations, which resulted in a basic agreement on measures needed to facilitate agreements concerning cargo and service trade and investment, ministry spokesman Wang Xinpei said.

The process of joint research would be concluded at the next meeting in October. The two countries have been involved in joint research on the subject since March 2006. Once the research in concluded, the two sides will decide whether it was time to start negotiations on a free trade agreement, Wang said.

"If you are not part of RTAs, you stand to lose," vice minister of Commerce Yi Xiaozhun said. Beijing is talking to 28 countries and regions on regional trade arrangements. It has signed
Free Trade Agreement with Chile and Pakistan and a cargo trade agreement with the Association of Southeast Asian Nations.


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EUROASIA: Turkmenistan-Afghanistan-Pakistan pipeline Project

Since the collapse of the Soviet Union, armchair journalists and strategists have promulgated the concept that a new Great Game is afoot in Eurasia.

This time, the prize is not land but access to the Caspian`s vast hydrocarbon reserves, estimated by the U.S. Energy Information Administration at proven reserves of 17 billion to 49 billion barrels of oil; proven natural gas reserves are estimated at up to 170.4 trillion cubic feet, with possible reserves of an additional 293 tcf.

In this new vision, Russia represents the czarist Russian Empire, while the United States has supplanted the British Empire.

Both sides have scored victories and defeats. Western capital and the Baku-Supsa pipeline, and more recently the $3.6 billion, 1,092 million-barrel-per-day Baku-Tbilisi-Ceyhan pipeline, have removed Azerbaijani oil exports from Russian exploitation via the Baku-Novorossiisk pipeline, with its tariffs five times higher than that charged by Baku-Supsa.

The picture is more nuanced in Kazakhstan, which, while permitting Western investment in its massive offshore Kashagan and onshore Tengiz fields, nevertheless remains wedded to Russia`s Transneft-dominated Caspian Pipeline Consortium pipeline to Novorossiisk.

Accordingly, the Great Game Two arena has shifted to the greatest undeveloped prize in the Caspian, Turkmenistan`s immense natural gas reserves, estimated to be at 29 tcf, the fifth-largest of the world`s recoverable reserves, a resource that not only Russia and the United States, but China and India as well, would dearly love to acquire.

While under Turkmen President Saparmurat Niyazov Turkmen gas exports moved via the Transneft network, Turkmenbashi repeatedly expressed his unhappiness over Moscow`s low rate of remuneration and sought alternative markets. His death last December opened possibilities and dusted off Western plans for a proposed Turkmenistan-Afghanistan-Pakistan natural gas pipeline to supply the energy-hungry markets of Pakistan and India.

A TAP pipeline would fulfill Washington`s twin policies of thwarting transit routes through the Russian Federation or Iran. While both producers and markets would greatly wish for the project to succeed, the geopolitical realities for the present deem otherwise.

Turkmenistan`s export options are limited; a trans-Caspian westward pipeline linking up to Azeri facilities is unlikely as long as status talks on the final division of the Caspian`s offshore waters among Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan remain deadlocked.

Moving Turkmen natural gas via liquefied natural gas shipments is also a non-starter, as Turkmenistan does not have the finances to build liquefaction facilities, ports or tankers, and even if it did, the Caspian`s sole egress to the world`s oceans is via the Volga-Don Canal, and it seems most unlikely Russia would agree to the untrammeled traffic of tankers bearing away Turkmen LNG. Accordingly, pipelines remain Turkmenistan`s sole option for the foreseeable future.

Notwithstanding the political and logistical difficulties last month, the Pakistani government awarded a contract for the construction of the 1,367-mile Turkmenistan-Afghanistan-Pakistan pipeline to the U.S. International Oil Co. Turkmenistan-Afghanistan-Pakistan pipeline, as envisaged in Islamabad, has an estimated cost of $3.5 billion and projected construction time of three years. Besides a pipeline, the project as envisaged would include two oil refineries and four thermal power plants of 1,000 megawatts apiece, running from Turkmenistan`s Dovetabat natural gas deposit to the Indian town of Fazilka near its border with Pakistan. Last November Afghan Foreign Minister Rangin Dadfar said, 'We hope that Pakistan will open its territory for an international pipeline to India as soon as possible.'

Turkmenistan-Afghanistan-Pakistan pipeline first came to life 12 years ago when in March 1995 an inaugural memorandum of understanding was signed between the governments of Turkmenistan and Pakistan. The following year a Unocal-led consortium established the Central Asia Gas Pipeline Ltd. group. In October 1997 CentGas was incorporated in signing ceremonies in Turkmenistan`s capital, Ashgabat, as several Western oil companies initialed agreements with the Turkmen government. Unocal subsequently withdrew from the consortium the following December.

While the U.S.-led Operation Enduring Freedom in the aftermath of the Sept. 11, 2001, attacks swiftly removed the Taliban from power, it did not destroy the militia`s subsequent guerrilla movement, which was paralleled by rising radicalism in Pakistan east of the Durand Line delineating the Afghan-Pakistan border. Pakistani Pashtuns in the turbulent Northwest Frontier province increasingly picked up their guns to contest Islamabad`s control. Nonetheless, a new Turkmenistan-Afghanistan-Pakistan pipeline pipeline contract was signed in December 2002 among Turkmen, Afghan and Pakistani officials, and in 2005 the Asian Development Bank submitted the final version of a feasibility study drawn up by the British company Penspen.

The agreements flew in the face of the mounting violence in both Afghanistan and Pakistan. Even worse for Turkmenistan-Afghanistan-Pakistan pipeline backers, Pakistan`s Balochistan province became increasingly restive, raising the question for potential Western investors as to how Kabul and Islamabad proposed to quell their rising insurgencies. While Washington, New Delhi and Islamabad earnestly hoped somehow the situation would settle, the fact remained significant portions of the proposed Turkmenistan-Afghanistan-Pakistan pipeline route remained outside of central government control of either Afghanistan or Pakistan, and the situation has only worsened with time.

Nevertheless, across the Hindu Kush hope springs eternal; on Sept. 6, after announcing the establishment of 'an Energy Security Division in the Ministry of External Affairs,' the Press Information Bureau of the Indian government issued a statement saying, 'We have also formally conveyed India`s interest in joining the Turkmenistan-Afghanistan-Pakistan Gas Pipeline project.'

As an editorial last month in Pakistan`s Daily Times noted with understatement, the pipeline security agreements have 'to be taken with a pinch of salt.'

So, where do things stand?
The producers (Turkmenistan) want it, as do the consumers (Pakistan and India). Unfortunately, people living on the territory to be traversed by the proposed pipeline seem determined to contest the centralized governmental control of Kabul and Islamabad, which makes attracting significant Western investment in the project problematic at best.
Turkmenistan-Afghanistan-Pakistan pipeline seems to remain a product of wishful thinking in Ashgabat, Kabul, IslamabadNew Delhi, for the moment a 'pipe dream.' and


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