Testimony by John J. Maresca, Vice President, International Relations UNOCAL Corporation to House Committee on International Relations Subcommittee on Asia and the Pacific

[Excerpts. Full version at http://www.house.gov/international_relations/105th/ap/wsap212982.htm ]

FEBRUARY 12, 1998

Mr. Chairman, I am John Maresca, Vice President, International Relations, of Unocal Corporation. Unocal is one of the world's leading energy resource and project development companies. Our activities are focused on three major regions -- Asia, Latin America and the U.S. Gulf of Mexico. In Asia and the U.S. Gulf of Mexico, we are a major oil and gas producer. I appreciate your invitation to speak here today. I believe these hearings are important and timely, and I congratulate you for focusing on Central Asia oil and gas reserves and the role they play in shaping U.S. policy.

The Caspian region contains tremendous untapped hydrocarbon reserves, much of them located in the Caspian Sea basin itself. ....By 2010, Western companies could increase production to about 4.5 million barrels a day (Mb/d) -- an increase of more than 500 percent in only 15 years. If this occurs, the region would represent about five percent of the world's total oil production, and almost 20 percent of oil produced among non-OPEC countries.

One major problem has yet to be resolved: how to get the region's vast energy resources to the markets where they are needed. There are few, if any, other areas of the world where there can be such a dramatic increase in the supply of oil and gas to the world market. The solution seems simple: build a "new" Silk Road. Implementing this solution, however, is far from simple. The risks are high, but so are the rewards.

...[A] route through Afghanistan appears to be the best option with the fewest technical obstacles. It is the shortest route to the sea and has relatively favorable terrain for a pipeline. The route through Afghanistan is the one that would bring Central Asian oil closest to Asian markets and thus would be the cheapest in terms of transporting the oil.

Unocal envisions the creation of a Central Asian Oil Pipeline Consortium. The pipeline would become an integral part of a regional oil pipeline system that will utilize and gather oil from existing pipeline infrastructure in Turkmenistan, Uzbekistan, Kazakhstan and Russia. .....

There is considerable international and regional political interest in this pipeline. Asian crude oil importers, particularly from Japan, are looking to Central Asia and the Caspian as a new strategic source of supply to satisfy their desire for resource diversity.

.....A recent study for the World Bank states that the proposed pipeline from Central Asia across Afghanistan and Pakistan to the Arabian Sea would provide more favorable netbacks to oil producers through access to higher value markets than those currently being accessed through the traditional Baltic and Black Sea export routes.