Oil. Big Profits. Big changes? By Edward Teague

5 March 2005 — The New Dark Age

Exxon Mobil (NYSE:XOM), buoyed by record oil prices, became (by market capitalisation, $411BN Shares at $64) the largest company in the world. They have taken No1 place from General Electric (NYSE:GE) whose Market Capitalisation is today, $382 BN Exxon Mobil also claim to be the largest oil co in terms of proved reserves and production, including 36% of known North American oil and gas reserves.

Unocal’s share price (NYSE:UCL) reached a record high of $64 with a market value of around $16Bn. Unocal, once called Union Oil Co. of California, was founded in 1890 in Santa Paula in Ventura County. Known for its Union 76 brand of petrol, it was a major player in California’s oil and gasoline markets until the mid-1990s. The company then sold the gasoline business and the last of its California oil fields to focus on exploration and production elsewhere mainly the Caspian Sea, Bangladesh and Myanmar. Stated oil reserves are 1.75 billion barrels of oil at the end of last year, nearly unchanged from the end of 2003.

The eighth-largest US domestic oil company, it has its world wide headquarters in El Segundo CL, home of the LA Lakers and just outside Los Angeles -“improving people’s lives wherever we work” – and reported record Q4 2004 profits on Feb 1st 2005.

“Our earnings continue to be driven by strong crude oil and natural gas prices,” said Charles R. Williamson, Unocal chairman and CEO. With profits up 49% on the same period in 2003 the company realised prices worldwide for natural gas $4.15 per thousand cubic feet (mcf), up from $3.65 (up 14%). Oil prices including hedging costs were $41.27 per barrel, up from $28. (up 47%)

For 2005 the Chairman said after-tax earnings are expected to change $9 million for every $1 change in its average worldwide-realized price for crude oil.

Afghanistan

In 1997 Unocal had served as the development manager for the seven-member Central Asia Gas (CentGas) pipeline consortium, which was formed in October 1997 to evaluate and, if appropriate, to participate in the future construction of a gas pipeline from Turkmenistan through Afghanistan to natural gas markets in Pakistan and, potentially, India.

In 2002 Chairman Williams clarified the position of the company, “We met with many factions, including the Taliban, to educate them about the benefits such a pipeline could bring to this desperately poor and war-torn country, as well as to the Central Asian region. At no time did we make any deal with the Taliban, and, in fact, consistently emphasized that the project could not and would not proceed until there was an internationally recognized government in place in Afghanistan that fairly represented all its people.”

He went on “The company officially withdrew from the project in December 1998”

On August 7th 1998 simultaneous bomb blasts hit the US embassies in Nairobi, Kenya with 247 dead, 5,436 injuries and at Dar es Salaam in Tanzania 10 people died and 70 were injured in the simultaneous bombings of the US embassy in Dar es-Salaam, in neighbouring Tanzania, a combined death toll of 257.

The US press were shrill and not short of suspects backed by governments alien to American interests The New York Times suggested Libya and later in an editorial vilified Iraq. The Washington Post added Syria (sounds familiar) and Islamic fundamentalist groups based in Yemen and Egypt to the list of potential bombers.

The Wall Street Journal meanwhile were hysterically denouncing Clinton for ignoring evidence that Iran was behind the blasts, and declared the attack on the embassies “an act of war.” The paper also cited Reagan’s bombing raids on Libya in 1986 in answer to the Berlin disco bombings, as an example of swift and certain military reprisal.

By August 12th there was however, “convincing evidence” that Osama bin Laden was responsible. Clinton decided a clear signal had to be sent, On August 20th, 3 days after his testimony to the Federal Grand Jury about his relationship with Monica Lewinsky, Tomahawk Cruise missiles targeted Afghan “terrorist related” camps near Chows and Jala killing a claimed 20 people, they also targeted Khartoum, Sudan wrecking a third world aspirin factory allege4dly a centre for Al Qaeda nerve gas production for which not a shred of evidence was ever produced.

Clinton’s message was, the survival of his presidency depended upon his adopting the platform of his most right-wing opponents.

A signal, which was noticed in Washington. Senator Orrin Hatch, who had recently and publicly called Clinton a “jerk,” and the Wall Street Journal, which had branded him a “sociopath,” applauded the bombing. The mainstream media, which universally proclaimed president Clinton a liar for his role in the Lewinsky affair, fell over itself to admire the sudden military strikes, and the sweeping and unsubstantiated claims of his administration about the identity of the bombers.

It was only after the event that the general public started asking whom this rich Arab playboy, of whom they have never heard, was.

Beach Boys in Trouble

However in sunny surfside El Segundo the “best laid plans of mice and men” were fast going agley.

The Centgas pipeline project for transiting Afghan territory evaporated overnight and was finally and formally cancelled 2 months later. Unocal was the lead company in the formation of the Centgas consortium, whose purpose was to bring to market natural gas from the Dauletabad Field in south-eastern Turkmenistan, one of the world’s largest. The $2 billion project involved a 48-inch diameter pipeline from the Afghanistan-Turkmenistan border, passing near the cities of Herat and Kandahar, crossing into Pakistan near Quetta and linking with existing pipelines at Multan. There was a possibility of a further $600 million pipeline onward to India under consideration.

Afghan-born Zalmay Khalilzad had drawn up a risk analysis for Unocal of a proposed gas pipeline from the former Soviet republic of Turkmenistan across Afghanistan and Pakistan to the Indian Ocean. He participated in talks between the oil company and Taliban officials in 1997, which were aimed at implementing a 1995 agreement to build the pipeline across western Afghanistan. He eventually ended up chosen by President Bush In December 2001 as special envoy to Afghanistan. In his position as advisor to Unocal Khalilzad actively lobbied for a more sympathetic US government policy towards the Taliban. In an op-ed article in the Washington Post, he defended the Taliban regime against accusations that it was a sponsor of terrorism, writing, and The Taliban does not practice the anti-U.S. style of fundamentalism practiced by Iran.’

”We should… be willing to offer recognition and humanitarian assistance and to promote international economic reconstruction,” he declared. ”It is time for the United States to reengage” the Afghan regime. This ”reengagement” would, of course, have been enormously profitable to Unocal, which was otherwise unable to bring gas and oil to market from landlocked Turkmenistan.

Unocal goes west

Khalilzad rapidly shifted his position on the Taliban after the Clinton administration ordered US warships to fire cruise missiles at targets in Afghanistan.

Born in 1951 in Afghanistan, Khalilzad eventually became was a graduate student at the University of Chicago, famous as the centre for the Straussian neo-cons.

Khalilzad  an American citizen, and acted as a key link between US imperialism and the Islamic fundamentalist mujahedin fighting the Soviet-backed regime in Kabul — the milieu out of which both the Taliban and bin Laden’s Al Qaeda group arose. He was a special advisor to the State Department during the Reagan administration, he lobbying very hard and with success for accelerated US military aid to the mujahedin, including hand-held Stinger anti-aircraft missiles which played a key role in the war (and which the US / UN forces are desperately trying to recover). He later became undersecretary of Defense under Bush Snr. during the US war against Iraq and subsequently went to the Rand Corporation.

When Bush was declared President by a 5-4 vote of the US Supreme Court, Khalilzad appeared from background to head the Bush-Cheney transition team for the Defense Department and to advise incoming Defense Secretary Donald Rumsfeld. Khalilzad was not given a cabinet post requiring a Senate confirmation which would certainly have provoked unwelcome questions about his role as an oil company advisor in Central Asia and as an Afghani born intermediary with the Taliban. Instead, he was named to the National Security Council, where no confirmation vote was needed.

At the NSC Khalilzad reported to Condoleeza Rice, the national security advisor, who had also served as an oil company consultant on Central Asia, and it is alleged had connections directly with Khalilzad and Kharzai. After serving in the first Bush administration from 1989 to 1992, Rice (an academic) was placed on the board of directors of Chevron Corporation (they also named an oil tanker after her) and she served as its principal expert on Kazakhstan, where Chevron (with strong ties to Russia) holds the largest concession of any international oil companies.

President Bush appointed Zalmay Khalilzad, as special envoy to Afghanistan just nine days after the US-backed interim government of Hamid Karzai took office in Kabul…In June 2003 President Hamid Karzai of Afghanistan was awarded an honorary knighthood (KCMG) by the Queen at Windsor Castle – an honour which was recommended by Tony Blair, reported the Times

Karzai has repeatedly been identified as an adviser to Unocal on the Centgas project in news reports in the United States and elsewhere. Unocal flatly deny that Karzai was ever affiliated with them or that he was on their payroll, although their spokesman said he ” could not speak for all of the Centgas consortium members”.

Unocal Goes East (?)

In” Mapping the Global Future”, an assessment of the world’s prospects in 2020, the US government’s National Intelligence Council says China is expected to boost its energy consumption by 150 per cent.

Recent trips by Hu Jintao, the Chinese president, to countries such as Kazakhstan and Gabon reflect China’s thirst for energy. Sinopec, the Chinese state-controlled oil group, has just agreed a $70bn long-term deal to buy Iranian oil and liquefied natural gas for the next 30 years. The Chinese government has just pre-paid $6bn to Rosneft, the Russian company that now owns the main production unit of the defunct Yukos oil group, as advance payment for oil supplies. China has sent $6bn to Rosneft, the Russian company that bought the main production unit of the embattled Yukos oil group, as advance payment for oil supplies.

A principal concern of Beijing, is the possible use of US and Indian naval power to control oil supplies from the Middle East in choke points of the Straits of Hormuz and the Malacca Straits. The Chinese are building up a capability to defend those sea lanes, and it is evident that naval rivalry is building in the area – a fact re-enforced by the rapid deployment of US naval might in helping after the Indonesian tsunami disaster.

As a consequence, Beijing is increasingly looking to the west coasts of the Americas, having signed deals with president Chavez on his recent visit to Beijing and with reports that the state owned China National Offshore Oil Corp are preparing to bid $7Bn for Unocal.

There are of course other oil majors, awash with cash who are eying up Unocal, the one most mentioned is Chevron Texaco similarly based in California but some 20 times the size. Sheel, BP, Italian ENI are also mentioned. But. Nobody really wants to queer their pitch with Beijing, who facing soaring demands for energy will be an increasingly important customer for oil, gas and energy products.

Impotent Uncle Sam

Mired in Iraq, faced with burgeoning deficits, set to grow by increasingly costly oil imports, debilitating social service costs and pensions, with allies fast disappearing – no longer the “Coalition of the Willing” but “Joint Military Forces” and coolness if not outright hostility from Old Europe uncle Sam is increasingly feeling the heat in his own backyard as China hoovers up world resources.

Beijing who bought up the IBM PC business for just the debt on a weeks trading, can snap up the 8th largest oil co in the US for some 2 weeks trading deficit – and it doesn’t look as though Uncle Sam can do too much about it. All this when Vladimir sent him packing- “his no means no” – when all he wanted was some of his financial backers money back which they saw pouring away when the Yukos oligarchs ended up in the slammer.

’bout time Uncle Sam started swatting a few Beehives.

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