The Great Energy Game
As demand soars, central Asia's oil and gas reserves are a magnet pulling in the world's powers
Europe's need. That episode awakened Europe to its energy vulnerability. "Recent events have proven important for the European Union," says Ferran Tarradellas, the European Commission's energy spokesman. "Before, there was cheap energy everywhere. Now we are importing half our energy, and the trend is to go up to 70 percent in the future. This is not a problem just for certain states but for all of us."
Since the fall of the Soviet Union in 1991, central Asian countries have continued to be dependent on Russia for exporting their oil and gas. The United States, looking out for its own strategic interests in the region, wants to change this. That's why U.S. officials have been pushing the $4 billion Baku-Tbilisi-Ceyhan pipeline, which opened with much fanfare in July and links Azerbaijan, Georgia, and Turkey. At the ribbon-cutting, the 1,109-mile pipeline was hailed as "the Silk Road of the 21st century," bypassing Russia to bring oil from the world's third-largest reserves in the Caspian to a Turkish port on the Mediterranean, where it can be loaded onto tankers to supply global markets.
Kazakhstan, the largest country in central Asia, has three of the world's richest hydrocarbon fields. One of them, Kashagan, was discovered in the Caspian five years ago. It is believed to rank among the five largest fields on Earth and is expected to start producing in the next few years. Kazakhstan produced 1.2 million barrels a day last year, but it is expected to pump 3 million barrels a day by 2015-almost as much as Iran. Chevron is spending over $5 billion to expand production there, its largest project anywhere. "There are very few places in the world that have still untapped reserves and the openness in the business environment," says Roman Vassilenko, a Kazakh government spokesman. He says 70 percent of Kazakh oil production is owned by foreign companies.
No surprise, the country is being wooed by all sides. Vice President Dick Cheney, a former oilman, visited Kazakhstan in May, as did the European Union's energy commissioner. Before arriving, Cheney gave a speech attacking Russian manipulation of energy resources: "No legitimate interest is served when oil and gas become tools of intimidation or blackmail." Afterward, Russian dailies warned of "the beginning of a second cold war." Cheney left with a pledge from Kazakh President Nursultan Nazarbayev to export Kazakh gas through a trans-Caspian pipeline, when-and if-it is built. But soon after, Nazarbayev went to Russian President Vladimir Putin's summer residence on the Black Sea and agreed to cooperate in extracting oil from three fields in the Caspian, as well as to share military equipment and expertise. The leaders also signed a long-term contract for Gazprom to transport Kazakh gas. "The U.S. in the mid-'90s had better leverage because it offered sovereignty and western technology," says Verrastro. "Now countries believe Russia and China can hurt them, and the U.S. won't necessarily protect them, so they are hedging their bets."
Before this year, all pipelines from Kazakhstan passed through Russia. But in July, a 620-mile line started operating from central Kazakhstan to feed two refineries in China. Right now it is carrying low volumes, but the Chinese envision this oil pipeline extending to the west of Kazakhstan, where the Chinese hold significant assets. China, the world's second-largest oil consumer, is looking at its own energy security. It gets almost half its oil imports from the Persian Gulf and worries that in a conflict, the U.S. Navy could easily cut off these imports. "If they are given the green light to build a pipeline, they will build it and then figure out the supply," says Julia Nanay of PFC Energy, a consultancy.
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