Amoco promoting more U.S. involvement in Caspian region

Oct 23, 1997 02:00 AM

The U.S. government must continue to increase its involvement in the Caspian Sea region, given the United States' expanding strategic and commercial interests there, an Amoco Corporation executive said recently in testimony before a Congressional subcommittee.
Charles Pitman, president and chairman of Amoco Eurasia Petroleum Corporation, made his remarks at a hearing held by the U.S. Senate Foreign Relations Subcommittee on International and Economic Policy and Trade. Pitman recommended specific action steps for the U.S. government to take that would enhance U.S. business investment in the Caspian, as well as assist in solving regional issues and conflicts.
Amoco recommended four steps for U.S. Government: 1) Repeal Section 907 of the Freedom Support Act, 2) Support efforts to establish a commercially viable and secure main export pipeline to carry Caspian oil to western markets, 3) Work to resolve regional conflicts, 4) Encourage resolution of the legal status of the Caspian Sea in a way that protects private investment.
Pitman called for a "repeal of Section 907 of the Freedom Support Act and a policy that encourages the earliest possible development and shipment of oil from the Caspian Sea region to western markets."
The Caspian region holds an estimated 100 billion to 200 billion barrels of oil resources. Amoco is one of the largest U.S. investors in the region, with several exploration and production projects in Azerbaijan and Kazakhstan.
"Over the last twenty years, it has become clear that the United States, as a consumer, has a national interest in developing diversified sources of energy," Pitman said. "We believe that oil from the Caspian basin offers the U.S. a prime opportunity for diversification. "Significant U.S. involvement in the development of the Caspian reserves will also bring economic growth to the states in the Caucasus," Pitman added. "The Caspian region provides significant new opportunities for a broad range of American industries in addition to energy." Global competition is intense in the region, according to Pitman. "U.S. companies have been most competitive when U.S. policy toward Azerbaijan has been most engaged or supportive. Conversely, U.S. companies have been least competitive when the Azeris have perceived US policy to be unfair and disengaged," Pitman testified.
Section 907 of the Freedom Support Act is an example of the U.S. government exerting "negative influence" in the region, Pitman said. Section 907 prohibits direct U.S. bilateral assistance to Azerbaijan, which restricts or limits support ranging from financial and humanitarian aid efforts to America's involvement in the region's peace process. Amoco concurs with a Clinton Administration report issued earlier this year that found Section 907 hinders U.S. policy objectives in the region and puts U.S. businesses at a disadvantage, Pitman stated. "Foreign competition for Caspian resources is high, and foreign governments support their companies to make them more competitive," Pitman testified. "U.S. companies should be able to take advantage of the same kind of support, but may not currently because of Section 907."
The U.S. government could also assist regional development and stability by supporting efforts to build a commercially viable and secure main export pipeline to carry Caspian oil to western markets.
Many countries in the region are "vying for control" of the main pipeline, which will ultimately transport between 500,000 to 1 million barrels of oil per day, Pitman said. The Azerbaijan International Operating Company (AIOC), an Amoco-BP led consortium of 11 international energy companies that will begin producing oil from the Caspian later this month, is studying routing options through Russia, Georgia and Turkey. A decision is expected late next year.
Amoco prefers the Turkish route, which runs from Baku to Ceyhan on the Mediterranean coast "if it is made commercially viable," Pitman pointed out. "In short, it's twice as long as the Georgian route and, therefore, it costs twice as much.
"Mr. Chairman, I encourage you, and the Administration, to promote the strategic interests of the U.S. by helping make the Baku-Ceyhan route economically feasible," Pitman said. "We urge U.S. officials to work with their Turkish counterparts to find means to narrow the financial gap between the Turkish option and other options. We are prepared to cooperate in this endeavour."
Pitman applauded the U.S. government's ongoing efforts to promote peace in the region, specifically, in Nagorno-Karabakh, where the U.S. is now a co-chair of the OSCE Minsk group seeking to resolve the deep differences between Azerbaijan and Armenia.
He also urged the United States to take a more active role in resolving the legal status of the Caspian Sea, and specifically, to work for a regime other than the condominium concept promoted by Russia and Iran.

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