Memorandum submitted by the Royal Dutch
Shell has the following investment interests
in the region:
Kazakhstan: Temir. Onshore Exploration joint
venture. 60 per cent Shell, 40 per cent Veba. OKIOC. Offshore
North Caspian Exploration joint venture. 14.3 per cent Shell.
CPC. Consortium constructing oil evacuation pipeline from Kazakhstan
to Black Sea. Rosneft/Shell 7.5 per cent.
Representation in Azerbaijan, Turkmenistan &
Turkey plus office in Uzbekistan.
In addition to its existing investments in Kazakhstan:
Shell trades (or is discussing trade)
crude oil in or through all the countries of the Caspian littoral.
Shell is interested in the export
of gas from the Central Asian states to Turkey, Europe and other
potential markets in Asia. In pursuing this interest, Shell carried
out in 1998 a majority study into the feasibility of alternative
routes for the export of Turkmen gas to Turkey and beyond into
Europe. The Government of Turkmenistan has recently awarded a
mandate to pursue the construction of a Trans-Caspian gas pipeline
(TCT), to PSG, (a 50/50 joint venture between the US companies
Bechtel and GE Capital), but is still expressing keenness for
Shell to be involved.
Shell has also had discussions with
a range of parties in all the other countries of the region. In
particular, it has recently signed an agreement with the Government
of Uzbekistan to study options for developing certain gas fields
in that country and in conjunction with a number of other companies
is undertaking a study of options for evacuating oil production
Shell has recently reinforced its
position in Turkey in response to other regional developments
involving Shell and/or its partners. InterGen (a 50/50 JV between
Shell & Bechtel) has been awarded the tender to develop three
large base load power gas fired power generation plants. It is
doing this in conjunction with the Turkish company, Enka. This
business anticipates further significant opportunities in Turkey.
Shell has worked with SOCAR in Azerbaijan
on options to optimise utilisation of Azerbaijani gas, and has
also discussed the possibility of involvement in the proposed
Baku-Ceyhan oil line. At present this has a low priority until
such time as Shell acquires an adequate position in oil reserves.
Shell has no current interests in exploration and production in
Azerbaijan, following unsuccessful bidding on concessions, but
it will want to rectify that situation at some point in the future.
Over the last five years, Shell has benefited
from contact with the DTI and the FCO, in London, Washington and
Central Asia. Particular support was offered by the FCO in the
context of the visit to the UK by President Aliyev of Azerbaijan
in summer 1998. These contacts have involved specific support
in obtaining access to key figures, as well as information-exchange.
UK officials have always shown willingness to help. Their ability
to offer country knowledge/analysis has been appreciated, although
inevitably constrained by limited resources.
UK Ministers, including the Prime Minister,
have also offered strong support. Given the importance attached
by a number of countries of Central Asia to the development of
political relations with major Western governments, such contacts
will remain highly influential in enabling UK companies to compete
with others (see below).
The oil price level and expectations about its
future movement will have a major influence on the timing and
scale of development of the hydrocarbon reserves of Central Asia.
The requirement of high levels of initial capital investment will
inhibit the pace of infrastructure development as long as oil
prices remain low. Nevertheless the scale of the reserves in the
region is such that they are likely to be required at some point.
This may require a phased, incremental approach to development
of the region. For the Central Asian States themselves, early
revenue streams from development of the reserves are needed to
help underpin the evolution of post-independence economies. Shell
considers itself well placed to co-ordinate and progress such
incremental development, building on its influence through various
regional and extra-regional alliances and established country
It has good relations with the Governments and
industry in Turkey, Iran and the Central Asian states, as well
as the USA. It also has a strategic alliance with Gazprom. This
last relationship makes Shell unique amongst the major Western
oil companies and may well be a significant factor in operating
successfully in a sensitive region, where there is a need to recognise
and balance the interests of the three traditional regional powers
(Turkey, Iran and Russia) and major external players (such as
the USA and key EU countries), if commercially viable and politically
acceptable solutions to regional energy exploitation are to be
Accordingly Shell wishes to maintain good relations
with all the states of Central Asia and believes that the UK government
has and should continue to make a significant contribution to
The UK government appears to devote fewer resources
to Central Asia than the US, German, French and other governments.
The US Government, in particular, is committing substantial effort
to building political and strategic links with the Central Asian
states, and is using the resulting influence to advance US commercial
interests. US government lobbying had a key influence in Turkmenistan's
decision on leadership of the Trans-Caspian pipeline consortium.
Such lobbying is likely to continue and is likely to have the
effect of giving US companies disproportionate success, if not
offset by similar efforts by other Governments on behalf of their
The EU is very keen to make an impact in the
region and encourage business efforts especially through its INOGATE,
TRACECA and TACIS programmes. Some co-operation is afforded through
Brussels, but improvements in access and communications would
undoubtedly be beneficial to both Shell, and the EU's resultant
standing in Central Asia and the Caucasus, from the point of view
of energy exploitation.
Other EU member countries make good use of their
placement of energy representatives in Brussels to advance the
interests of their national industries in Central Asia and the