The War For Black Gold

The Game resumed, after a 75-year hiatus, with the collapse of the Soviet Union, and this one is far more complex than the original one that Rudyard Kipling’s Kim romanticised. The prize this time: the vast oil and gas reserves which the eight former Soviet republics in Central Asia are sitting on. And the new Great Game now has an Indian player: the Ambanis of the Rs 15,000-crore Reliance group, who met President Bill Clinton for an exclusive hour-long tete-a-tete in the president’s private suite Kohinoor on the 31st floor of the Oberoi in Mumbai on March 27.

What’s it all about? For the James Bond version of it, see The World is Not Enough, all about building a gas pipeline from Central Asia through Turkey. As for the facts, here they are. Proven oil reserves in Central Asia are pegged at between 15 billion to 31 billion barrels, about 2.7 per cent of the total proven oil reserves in the world. Proven natural gas reserves of 230 to 360 trillion cubic feet represent about 7 per cent of total world proven gas reserves. Some geologists assert that proven reserve numbers are misleadingly low because huge areas of the region have not been explored.

But the countries with the largest export potential, Kazakhstan, Azerbaijan and Turkmenistan, are landlocked. Unlike competitors in other large oil-rich regions such as the Middle East, South America and even Russia, they cannot simply ship their produce by tanker from domestic ports. Instead, these countries must rely on expensive pipelines constructed through foreign territories to reach ports where tankers can load the gas to carry across the world. Many possible routes have been discussed: through Russia, Georgia, China, Afghanistan, Iran and Turkey via Georgia or Armenia, but development of pipeline corridors has been a slow and painstaking process because of the unsettled political climate of the region. And one pipeline route option is through Afghanistan and Pakistan, down to Karachi and western Indian ports. Interested parties in this mega project include neighbours Russia, Turkey, Iran and China, as well as Pakistan and India; and the US, Europe, Japan, Saudi Arabia and even Israel. And every major energy corporation on Planet Earth.

Reliance wants to build pipelines carrying oil and gas from Central Asia on one side and Bangladesh and Myanmar on the other to India. This makes peace in the volatile region of paramount importance.

According to Upstream, the world’s largest and most reputed oil and gas journal, Reliance is close to acquiring a block in southern Iraq and is negotiating for exploration and production assets in Iran, Russia and Latin America. And even if Sheikh Hasina’s Awami League, Bangladesh’s ruling party which is considering export of surplus gas to India, can be handled with relative ease, the Ambanis need a strong friend to tackle issues involving Pakistan and other countries in Central Asia.

Naturally, Reliance is tightlipped over the Clinton meeting. But highly-placed industry sources say that the Ambanis’ regional peace process started a year ago when, after the Kargil intrusions last year, the Indian government despatched R.K. Mishra, who’s close to the Ambanis, on a secret mission to Islamabad to broker peace. "For the first time in history, a corporate entity driven by business interests took the first, bold step of playing a crucial diplomatic role between two warring neighbours," sources say. "If the Berlin wall can collapse, anything can happen. Pakistan will soon come to realise that it needs to expand business (in infrastructure sectors) and there’s a whole lot of options next door. So the Ambanis have taken the cue and moved in first," they add.

Reliance wants to get control of the Indian portion of the proposed pipeline from Turkmenistan to New Delhi via Afghanistan and Pakistan and former Pakistani premier Nawaz Sharif was apparently extremely receptive to the idea. While Islamabad and New Delhi publicly cold-shoulder each other over cross-border business prospects, sources close to the Ambanis point out that though Western nations refuse to deal with Afghanistan’s ruling Taliban, companies like Unocal of the US and Bridas Corporation of Argentina are known to have developed close relations with the hardline Islamic faction ruling the country despite announcing plans to move out of this difficult project. Says former PM I.K. Gujral: "The economic compulsions are severe. In a few years, politics will take a backseat and better business sense will prevail among India, Pakistan and Bangladesh."

Apart from re-exporting the gas, India too needs the fuel. Says Indian Oil director Subir Raha: "India has to import gas because our reserves in the western sector are depleting. The eastern sector find is encouraging but it’s a long haul to commercial production. Afghanistan is no issue. If pipelines could be laid from Siberia to France at the height of Cold War, what’s the tension with Kabul? The Taliban will soon realise that economic implications are more important than political considerations."

Indeed, not just gas from Iran, Turkmenistan or Kazakhstan, industry sources say active lobbying for such transnational pipelines is currently on in Bangladesh and Myanmar where both British and US diplomats are exerting pressure on the Awami League government to allow gas exports - against the wishes of Opposition Bangladesh Nationalist Party (bnp) - to India.

That’s good news for India which does not import any gas now but has plans to become one of the largest Asian importers by 2005. As per current estimates, the nation’s crucial power sector accounts for nearly 45 mmscmd of gas, which will increase to 72 mmscmd during 2004-5 and 156 mmscmd during 2009-10. There will also be higher consumption by fertiliser, sponge iron and domestic fuel sectors. As dependence on natural gas rises, the gap between current supply and demand is widening. The demand is likely to increase by at least seven times in the next decade.

As a result, there’s increased activity in the subcontinent. Shell plans to set up a $1-billion lng terminal in Gujarat, while Unocal is giving final touches to its plans of building a $300-million lng terminal on the west coast. Both Shell and Unocal will import gas from the Gulf. Petronet, a joint venture of four Indian companies, is building two lng terminals at Dahej on the west coast and Kochi in the south with a joint capacity of 7.5 million tonnes. Similarly, there are plans to set up lng terminals at Kakinada and Vishakhapatnam on the eastern coast in collaboration with Hardy Oil of the UK and Total of France, respectively.

Consider the Ambani-Clinton meeting against this backdrop. Islamabad, after years of dithering, is finally showing positive signals to the proposed pipeline from Iran to India. And it’s primarily because both Pakistan and Bangladesh are counting on natural gas - both imported and produced locally - to propel economic revival. When General Musharraf seized power in October last year, he immediately ordered an increase in both exploration and production activities of domestic gas which currently meets 40 per cent of Islamabad’s energy needs. Similarly in Bangladesh (which has 23 trillion cubic feet of reserves), new discoveries have brought hopes of an economic revival.

"Gas is important because India’s power plants and industries will need it. Besides, it’s the best option India has to get rid of its killer pollution," says Enron vice-chairman Joseph Sutton. He adds that cross-border gas pipelines have often served as bridges for peace in some of the most politically volatile parts of the world. The Ambanis are confident. Once they taste success, the region’s global credibility will increase among bankers. Then will flow the cash. And gas.