18 October 2006
United States Supporting New Generation of Pipelines in Europe, October 17, 2006(State's Bryza highlights Kazakhstan as important player in European energy relations)
By Martha Paluch
Washington File Staff Writer
Washington -- The United States believes that expanded competition through new commercially developed pipelines, especially in the Caspian region, will provide economic efficiency and more stable supplies of oil and natural gas in Europe.
Citing a major increase of oil production in Kazakhstan as just one example of recent developments in the European energy market, Matthew Bryza, deputy assistant secretary of state for European and Eurasian affairs, reinforced U.S. support of new and expanded oil and natural gas pipelines in the region.
Describing the European natural gas market as “dysfunctional,” Bryza on October 17 stressed the need for increased competition, particularly through the building of more pipelines for oil and natural gas. He made his remarks during a conference co-sponsored by the Center for Transatlantic Studies at the Johns Hopkins School of Advanced International Studies and the Center for European Policy.
According to Bryza, the United States, along with other countries, is working hard to develop investment schemes to stimulate more public-private energy partnerships in the Europe and Eurasia region because “at the end of the day, private companies have to do it.” Therefore, he said, the projects backed by governments “have to make commercial sense.”
Gas and oil pipelines have been a source of great policy debate among nations. Many countries, including the United States, see the need for more diversification in energy markets and seek to establish new relationships between states and private investors to increase economic gains for all involved.
In regard to Kazakstan’s involvement in the Baku-Tbilisi-Ceyhan (BTC) pipeline agreement, Bryza called it a “natural marriage that should occur with Azerbaijan.” The 1,600-kilometer, $3.9 billion BTC pipeline opened July 13 and is designed to carry oil from Azerbaijan through Georgia to Turkey’s Mediterranean coast. (See related article.)
On June 16, Kazakhstan and Azerbaijan reached an agreement to facilitate the transport of Kazakh oil across the Caspian Sea to link with the BTC pipeline. Kazakhstan’s recent participation in the BTC pipeline “shows that this project has succeeded because it makes commercial sense,” Bryza said in a USINFO webchat June 29. “The laws of the market can be much stronger than the political preferences of countries.” (See related article.)
With future plans to link oil and gas lines from Kazakhstan to the BTC, countries in the region are beginning to have more and better export options, said Steven Mann, the U.S. State Department’s principal deputy assistant secretary for South and Central Asian affairs, during a House International Relations subcommittee July 25 hearing. (See related article.)
“Our pipeline policy -- a policy of anti-monopoly -- is changing the landscape of Eurasia in an important and welcome way,” Mann said.
During the 1990s, several countries in the Caspian Sea basin, including Kazakhstan, strove to develop their oil and natural gas reserves by building partnerships with international energy companies. However, these countries remained largely dependent on Russian-owned, Soviet-era pipelines to transport these resources to global markets.
The United States supported efforts by these companies and host governments to help the region achieve greater economic independence by expanding its export options through a regional east-west energy corridor consisting of multiple pipelines.
At the October 17 conference, Bryza said it should be the role of governments to help synchronize investments in these projects. He also described how public-private partnerships in pipeline projects would bring not only market efficiency, but also would provide the European community with more leverage when negotiating with Russia on energy policy.
The United States, Bryza said, hopes that “Gazprom will be compelled to change the way it does business” as a result of the changes in the market. Gazprom is Russia's state-owned natural gas monopoly. In January, it halted sales to Ukraine in a price dispute and began reducing pressure in transmission lines that also carry substantial supplies to Western Europe.
Gazprom had given Ukraine a deadline of January 1 to agree to pay quadruple the amount it previously paid for Russian gas, more closely reflecting market prices for the gas. At the time, the State Department said the United States supports moves toward free-market pricing but believes large price increases should be carried out gradually. (See related article.)
Bryza, in his remarks, also supported the expansion of the Caspian Region Consortium (CPC) as a means of avoiding energy transport problems that arise from the natural limit of the amount of oil that can move through the Turkish Straits to reach markets in Western Europe. The CPC pipeline links reserves in western Kazakhstan to the Black Sea, providing access to world markets.
Bryza also acknowledged that the proposed Pan European Pipeline -- a 1,319-kilometer oil pipeline from Constanta in Romania via Serbia and Croatia to Trieste in Italy intended to bypass the ecologically vulnerable Turkish straits for transporting Russian and Caspian oil -- is just one idea to solve the transport problem.
Citing three separate feasiblity studies funded by the U.S. Trade and Development Agency to evaulte other potential pipelines in Europe and Eurasia, Bryza mentioned that increased oil production in Kazakstan and other parts of the Caspian region will require at least one of these pipelines to be built. He said that the decision on which pipeline will be able to utilize the next big increment of oil from the Capsian region will be determined by the appeal of each private-public parternership for investors.
Bryza participated in a webchat about U.S.-European Cooperation on Energy on June 29. A transcript of that webchat is available on Webchat Station.
For more information on U.S. policy, see Caucasus.
