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UZBEKISTAN - Expanding The Russian System

Opposed to projects bypassing Russia, Moscow has pointed to one proposal which calls for expansion of the existing gas pipeline system between Central Asia and Central Russia. This would enable Uzbekistan and the other the Central Asian republics to export gas to European markets.

However, the powerful Russian gas monopoly Gazprom is reluctant to allow Central Asian gas to reach European markets where it is building itself up to become the dominant supplier in the coming decades.

Nor are Tashkent and Ashgabat keen on this proposal, as they want to end their total dependence on the Russian system. Uzbek officials suspect that, even if Gazprom agreed to the expansion of its system to allow the Central Asian states to export gas to Europe, the Russian monopoly could reverse its position and block access to its pipelines in the future.

Tashkent has also studied a proposed option to export gas through existing Russian pipelines to Belarus - where, it is said, the gas would then be transported by rail to Europe.

An alternative is to find markets in Asia. Tashkent has signed an MoU with the governments of Ashgabat, Kabul, and Islamabad to participate in a pipeline project to export gas to Pakistan. Uzbekistan is also being considered for a proposed 6,000 km pipeline to bring gas from Turkmenistan, Uzbekistan, and Kazakhstan east to China (see below).

The Afghan Option: Unocal is working with Tashkent, as the US oil major is doing with other Central Asian states, on a proposed system of oil and gas pipelines proposed to run across war-torn Afghanistan and Pakistan to ports on the Arabian Sea. Unocal heads a consortium for this project.

The oil and gas would be produced by both Uzbekistan and Turkmenistan. In Turkmenistan, Unocal would be involved in the development of the Dauletabad gas field, a super-giant. Unocal calls its project Central Asia Gas Pipeline (CentGas), and its twin facility for crude oil Central Asia Oil Pipeline (CAOP). One of its key partners in the proposed twin system is the Saudi company Delta Oil. Delta is said to be linked to members of the Saudi royal family.

Unocal is one of the companies negotiating a PSA with the state's NOC Uzbekneftegaz to develop oil and gas fields in Uzbekistan, where it is officially said that 63% of the country sits on hydrocarbon deposits, with 32 new oil and gas fields to be developed in addition to 18 fields to be rehabilitated. Uzbeneftegaz has been negotiating also with Agip, Mobil and Japan National Oil Corp. (JNOC), among others.

In November 1996, Uzbekneftegaz signed a series of agreements with Unocal to evaluate the country's potential crude oil and natural gas resources, as well as to determine the feasibility of using part of Uzbekistan's pipeline network to tie into Unocal's proposed CAOP.

If built, CentGas and CAOP would link Central Asian oil and gas producers to a proposed new deep-water port on Pakistan's Arabian Sea coast. Completion of projects such as CentGas and CAOP would bolster Uzbekistan's ability to attract foreign investment and increase production of oil and gas. CentGas would be supplying regions around Multan, in central Pakistan.

However, Tashkent is opposed to any deal dependent on the radical Taliban militia who are ruling Afghanistan at present. The Taliban, who uphold a fundamentalist Wahhabi version of Sunni Islam and are backed by Pakistan, have overrun a coalition of opposition forces including Uzbeks, Tadjiks and Shiites backed by Iran.

Now about 200,000 Iranian troops are massed on the border with Afghanistan, after the killing of Iranian diplomats and thousands of Shiite Afghans. It is speculated that, if the tension is not defused, Iran may land troops to help the Shiite Afghan fighters, with Tashkent and Ankara having recently increased their support for the Uzbek opposition fighters. Iran is said to be actively backing the Tadjik forces of Ahmad Shah Masood as well.

Saudi Arabia has deported Taliban's envoy from Riyadh and withdrawn its own envoy from Kabul, because the Taliban have insisted on protecting Islamic militant leader Osama Bin Ladin who has been stripped of his Saudi nationality. The Saudi move was promptly welcomed by Tehran and, according to Shiite sources, could be seen as an indirect encouragement for Iran to launch a landing operation in Afghanistan (see Diplomat's News Service).

At any rate, Unocal and its partners in the consortium have suspended the CentGas/CAOP project because of the tension (see background).
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Publication:APS Review Gas Market Trends
Date:Oct 5, 1998
Previous Article:UZBEKISTAN - Organisation
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