Official Statements
Roundtable
Ambassador Richard E. Hoagland
Ambassador Richard Morningstar
Tuesday, August 26, 2009
Astana, Kazakhstan
Ambassador Hoagland: I would like to introduce Ambassador Richard Morningstar to you by telling you a little bit about his biography.
First of all, his correct title: Ambassador Morningstar is Special Envoy for Eurasian Energy. Besides a distinguished career in the private sector, he held very important senior jobs during President Bill Clinton's administration. He was the Senior Vice President of the Overseas Private Investment Corporation. He was Special Advisor to President Clinton and the Secretary of State for assistance to the former Soviet Union very soon after the independence of the Soviet Republics. He was Special Advisor to President Clinton and to the Secretary of State on Caspian Basin energy diplomacy. And then for something a little different but extremely important, he was the United States Ambassador to the European Union. Because of his vast experience and his success in his previous jobs President Obama and Secretary Clinton have asked him to take this job right now. So it's my honor to introduce my colleague, Ambassador Morningstar.
Ambassador Morningstar: Thank you, Ambassador. First of all, it's a great pleasure for me to be back in Kazakhstan. This is my second trip here in the last six weeks. I was here with Undersecretary Burns and his delegation about five or six weeks ago, and I'm particularly happy to be here this time where I've had an opportunity to meet with many officials to talk about important issues that we have in the energy area.
It's also been very nice for me to make these past two trips because I remember so well all of my visits during the 1990s to Kazakhstan. When I look outside the windows, well maybe not this window, but when I see all the progress that's been made in Astana, it's really quite unbelievable.
So we did talk about many issues, and maybe the best way to go forward is for me simply to answer your questions.
Question: Reuters. Can you comment a little bit on your visit? With whom were you meeting? We are aware that you actually had a meeting with Kazmunaigaz. What did you talk about? What were your discussions?
Ambassador Morningstar: I've had several meetings and I certainly don't want to leave anybody out when I tell you whom I met with. We can probably provide you with the various meetings that I've had.
I had an excellent meeting with the Prime Minister. I had meetings yesterday with Mr. Kulibayev as well as Mr. Kabyldin and other key people in the energy area. I had a very good meeting this morning with Minister Mynbayev. I had three separate meetings with some of the technical people who are dealing with projects such as the CPC pipeline, the KCTS project, as well as the TransCaspian aspects of that project.
We had I think very excellent discussions about the specific projects, the expanded CPC project and the KCTS project. We are, the United States and Kazakhstan, in complete agreement as to the importance of those projects. We're going to see a tremendous increase in the output of oil from the Caspian over the next several years. We think that Kazakhstan, the projects that Kazakhstan is considering, are tremendously important as far as getting that oil out to the marketplace. We feel that a lot of progress has been made with respect to reaching agreements on those projects as well as the underlying exploration projects such as Kashagan.
There are a few outstanding issues related to the organization of aspects of the project and I think that we're certainly very confident that the government of Kazakhstan and the companies that are involved will finalize agreements in a very reasonable way as they always have done in the past.
Question: "Liter." What is your opinion about the recently launched Nabucco project and whether its design capacity will be able to increase the supply of gas to Europe and will be able to improve European energy security?
Ambassador Morningstar: We're very positive about the Nabucco project as well as the development of the whole of the southern corridor. And the signing of the agreement in Ankara, the intergovernmental agreement between Turkey and the member countries of the Nabucco consortium was a very important step forward. There are still many steps that have to occur, but we believe that the signing in Ankara gave a lot of impetus to the project and we hope to see continuing progress.
I should perhaps clarify, not to make things more confusing, but the intergovernmental agreement was actually signed with the European countries that the pipeline will travel through. The members of the consortium are in fact the private companies.
Question: "Panorama." Do you think in January of next year we will see the same conflict between Ukraine and Russia? And if so, what will Washington propose?
Ambassador Morningstar: First of all, I hope not. I don't think any country including Russia wants to see another gas crisis as happened in January. I can maybe say a few things about it.
First of all the European Union and the international financial institutions are working very closely with Ukraine to come up with a financing package which will help Ukraine pay its gas debts. We are very supportive of that process. The financing will set certain conditions that Ukraine must comply with in order for the financing to go forward which will include several reforms in Ukraine's gas sector.
We are certainly prepared to work with the European Union, the financial institutions, as well as Ukraine on various technical assistance programs which will help those reforms go forward.
Question: How realistic is the construction of the TransCaspian oil and gas pipelines? Will the United States be willing to provide both financial and political support?
Ambassador Morningstar: I think we have to separate the two issues. First of all, I think that the so-called KCTS project which would allow oil to go across the Caspian, probably by tanker as opposed to by pipeline, is a very reasonable project that ought to take place which we would provide a lot of political support for. We think that the KCTS project together with the expansion of the CPC pipeline are really the only realistic ways of getting the increased oil out of the Caspian and into the marketplace.
We are also very hopeful that there could be a gas pipeline across the Caspian from Turkmenistan. The president of Turkmenistan has stated that he would like to ship gas westward to Europe. There are several things that do have to happen before that would take place. Turkmenistan would have to increase its off-shore and on-shore production. We're working with them in the hopes of that happening. Turkmenistan and Azerbaijan would have to agree that such a pipeline could be workable and whatever issues those two countries have with each other in the Caspian should be resolved.
So yes, we do support that possibility.
As far as American financial help, I don't think anybody should expect there would be direct subsidies from the United States for these projects - from the U.S. government. U.S. financing agencies such as the Export/Import Bank and potentially the Overseas Private Investment Corporation could have some involvement. The Trade Development Agency could help with respect to feasibility studies, and international financial institutions where the United States plays a major role could also be a part of the financing process.
But ultimately it's going to take commercial entities to make these decisions and to make them work.
Question: There is a lot of talk about a future energy crisis in the Eurasian region. Can Kazakhstan do something about it? What is your opinion of a future energy crisis?
Ambassador Morningstar: Energy is always going to be an issue whether it is in Central Asia or anywhere else. I think that Kazakhstan has played a major role, a major positive role, and will continue to do so in this region. Kazakhstan has, I think, been very successful in working with private sector companies on various projects and therefore has been able to maximize those projects.
Tengiz is an example. Kashagan will be, I'm sure, a very successful project. Conoco has just signed an agreement to develop the so-called N Block in the Caspian. I think Kazakhstan's government has been very forward looking and will continue to ensure that Kazakhstan will play a positive major role in the energy area. I was certainly encouraged by the meetings that we've had in the last couple of days that Kazakhstan will continue to play a very positive role.
Question: How effective do you think is the European policy to diversify oil import routes, the countries from which there are imports in energy resources? Do you think there are enough transportation routes from our region?
Ambassador Morningstar: First, with respect to the effectiveness of Europe, I think Europe is becoming more and more effective in dealing with these diversity issues. I think that the gas crisis from last January has mobilized the European Union. Their "third energy package" that was developed this past spring is very helpful. I think that package is very important and that it showed support for specific projects as well as provided for important reforms with respect to the European energy market.
There are a lot of potential roots that can come from this region. There's the southern corridor which already, we're talking about Nabucco and the so-called Italy-Turkey-Greece Interconnector. Certainly the projects that we talked about on the oil side are very helpful as well.
Having said that, I think it's important to remember a couple of things. First, that Russia will continue to be a very major and important player with respect to supplying Europeans energy.
Second, that the so-called southern corridor is very important and we support it for reasons of diversification, but it's still only one part of the puzzle.
Third, and maybe even the most important, is that Europe has to make the reforms that it has talked about in its "third energy package," it has to create better connections between the countries, it has to develop alternative technologies and renewables and take the steps necessary to meet its climate change obligations. All of these factors will ultimately reduce the dependence on hydrocarbons.
Question: One problem is highly fluctuating prices for hydrocarbons, as high as $150 per barrel to as low as $40 per barrel. Do you think there is a need for some kind of super-national authority which will regulate these prices around the world?
Ambassador Morningstar: I know that's been suggested and there are a number of countries who would support that view. I think ultimately the solution to the problem is not necessarily some kind of international agreement that will somehow regulate the price of oil and gas. I think what needs to happen is increased competition, transparency, and the development of alternative technologies.
Question: All routes, not counting Russia, which go from Kazakhstan and Turkmenistan end up going through the Caucasus countries. How do you envision the role of Azerbaijan in the supply of hydrocarbons to Europe? And do you think that the instability that exists in the Caucasus, Azerbaijan's problems with Nagorno-Karabakh and Georgia's with Ossetia, affects the safety of transportation to Kazakhstan. Also, can the United States ensure the safety of transportation of Kazakhstani hydrocarbons via the Caucasus.
Ambassador Morningstar: That's a very good question. We feel confident that the routes that go through Azerbaijan and Georgia and Turkey will be safe and secure and will serve the purpose of transporting resources to Europe.
Issues relating to Nagorno-Karabakh and Georgian issues are not new issues. They've been in existence really since the breakup of the Soviet Union. The pipelines that have gone through Azerbaijan and Georgia have been secure in spite of political issues. Baku-Tbilisi-Ceyhan has been secure as well as the Baku-Supsa pipeline.
Security should be a continuing issue, and all steps should be taken to protect infrastructure, and certainly the United States and others have been and are willing to continue to provide advice with respect to security issues. I don't pretend to be an expert on the specifics of how to make pipelines more secure, but I do know that the pipelines that go through Azerbaijan and Georgia have been built with security very much in mind.
Question: What's the role of Azerbaijan in supplying hydrocarbons to Europe?
Ambassador Morningstar: They clearly have a major role. First of all, Azerbaijan has its own resources that, both oil and gas, that can go to Turkey and then to Europe, and it's an obvious transit country for both oil and gas products to come across the Caspian, either from Kazakhstan or Turkmenistan. So Azerbaijan does play a major role and will continue to play a major role. In fact I'm going there tomorrow.
Question: What I can sense from your responses, it seems like now the new U.S. administration is somewhat cautious or careful in the way it provides its support. Now it is trying to kind of balance out the political and economic issues rather than to prioritize politics over economics. Before, if a country said the United States is their strategic partner, all other countries should really be scared. It seems like this is changing. Is that the feeling we are getting?
Ambassador Morningstar: There may be some changes in emphasis in our policy with this new administration. I don't think the United States is trying to scare anybody. We certainly feel that we have strategic partners, but that doesn't mean that that should be a threat to anybody. As it comes to Central Asia, President Obama has said that we don't want to see spheres of influence and we don't want to see zero sum games. We are not looking to try to tell countries in this region what they should do. We wouldn't be able to even if we wanted to. All we care about is that countries, whether it's Kazakhstan or Turkmenistan or Azerbaijan, be able to make the decisions that they feel are right for them with respect to dealing with their own resources, as well as other issues.
So if a country like Kazakhstan wants to have a diversified approach towards exporting its resources, it should be able to.
Let me take this opportunity in answering your question to also say that in no way do we consider our policy to be anti-Russian. We want to engage with Russia on energy issues. We want to find areas where we can cooperate relating to issues such as investment, environmental issues, issues with respect to efficiency of energy. We think that the zero sum games in the energy area are too expensive in today's world so we would like to find ways to cooperate with Russia on energy projects. We're trying to depoliticize these issues.
There is a new presidential commission between the United States and Russia that will be organized by Secretary of State Clinton and Foreign Minister Lavrov. One of the subcommittees of that group will be to work on energy in the environment. So we will make every effort to engage and try to work together and understand each other and we hope that all works out.
I might also add that Kazakhstan has been a model in managing its relationships with Russia, its other neighbors, and with the United States.
Question: Going back to the question of diversification, at the end of this year the Kazakhstan and China oil pipeline will be launched and will have a design capacity of 10 billion cubic meters.
Ambassador Morningstar: Ten million tons. We're talking about oil.
Question: Right. And when you are talking about this project, KCTS and CPC expansion, it's still has four or five years to go. Chevron is talking about increasing its production at Tengiz to 23 million tons next year, and so Kazakhstani oil will likely go to China. Are you okay with this? Are you more or less happy with the fact that U.S. companies producing oil here will actually supply oil to China?
Ambassador Morningstar: It's a good question. There's a lot of oil and there's oil that can go in both directions. Just like there's a lot of gas in Central Asia that can go in both directions. China is in obvious need of energy resources and the relationship between Kazakhstan and China with respect to those resources is the business of Kazakhstan and China. If Kazakhstan feels that it's in its interest to export oil to China, then it should do so. We certainly would not feel that we should interfere in any way.
Question: In the last two weeks, there were negotiations between the government of Kazakhstan and the Kashagan consortium about the construction of the Yeskina-Koruk pipeline. And it coincided with your visit here. Do you know from your meetings what would be the share of Chevron in this pipeline? Also, is your visit somehow related with the support of Chevron in these negotiations to make sure that it gets a greater share in the deal?
Ambassador Morningstar: No, I can tell you that it's coincidental that I'm here at this time. Frankly, when I came six weeks ago with the Burns delegation there was not a whole lot of time to talk about energy issues so I wanted to come back to have meetings with the appropriate government officials on these energy issues.
I was very clear in all of my meetings that I'm not here to try to negotiate an agreement between the Kazakhstani government and the companies. I think the government clearly understands the issues, as do the companies. It's up to them to come to a reasonable solution. I think they will. The companies and the government have in the past always been able to reach agreements on various issues. Getting oil out of the Caspian and into the marketplace is important for everybody -- the government as well as the companies. So I have full confidence that they will find a reasonable solution and that whatever outstanding issues there are will be resolved in a way that won't delay any projects.
I think it's important also to recognize that much has already been agreed to. There are a few residual issues, but they will be resolved.
Question: What is the U.S. interest in Kazakhstan in the area of energy? And also what's the future in this area, maybe some energy partnerships?
Ambassador Morningstar: We feel we have a very strong relationship with Kazakhstan and we have very similar views with respect to energy issues. American companies have been very successful in working with Kazakhstan. The Tengiz project has been a very successful project and we expect that Kashagan will be as well. There are also new projects being planned such as the Conoco project regarding the N Block. So we think these are very important in increasing the production of oil.
We support very much Kazakhstan and companies in their efforts to get that oil to the marketplace through an expanded CPC pipeline as well as getting product across the Caspian as part of the so-called KCTS project.
So we look forward to working closely with Kazakhstan to ensure that these projects happen, and ultimately these are projects that have to be worked through by Kazakhstan and the companies involved.
Question: What's the status of this KCTS project?
Ambassador Morningstar: A lot of progress has already been made. There are still some questions with respect to the organization of the project. It's still in its very early stages. But we know that the issues, whatever issues are still outstanding, will be resolved between Kazakhstan and companies as they always have in the past.
Question: What are the dates of the KCTS project, dates of the realization of this project?
Ambassador Morningstar: I think you'd have to talk to the companies and to Kazmunaigaz and Kazakhstani officials as to what they expect the dates will actually be.
Thank you, everybody.
