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Sunday, August 30, 1998 Published at 07:31 GMT 08:31 UK

World: South Asia

Gas pipeline could be a pipe dream

The proposed pipeline would have been 1,271km long

A US oil and gas company has failed to secure financing for a proposed natural gas pipeline in Central Asia. Nassir Shirkhani reports:

Two years ago, Unocal thought it had found the perfect route via Afghanistan to tap Turkmenistan's abundant natural gas and sell it to the energy-hungry markets of Pakistan and India. It then quickly found eager partners to share in the risks and began the quest for financing the $2bn project.

But no creditor was ready to bankroll it while the civil war in Afghanistan raged on. The scheme involves building a pipeline from the Turkmen Dauletabad gas fields to the Pakistani town of Multan. Dauletabad, one of the world's largest gas fields, is estimated to be able to produce 15 billion cubic feet of gas per year for 30 years.

Ironically, as the Unocal-led group appeared to be moving closer to realising its dream in the wake of this month's military gains by the Afghan Taleban movement, the United States bombed guerrilla bases of the Saudi dissident, Osama bin Laden, in Afghanistan.

The Taleban, which is now in almost total control of Afghanistan, was seeking recognition as the legitimate government when the US launched missile attacks to punish Osama bin Laden for his alleged role in the bombing of its embassies in Africa.

An internationally-recognised government in Kabul would have paved the way for securing the financing, but American anger at the Taleban for harbouring Osama bin Laden, has, for the time being, stopped that.

Following the US air strikes Unocal suspended its plans.

Terry Covington, a spokeswoman for the company, told the BBC that the attacks are a severe setback to the project.

"We have not been able to secure financing from the international lending institutions because of the situation in Afghanistan. So that is a fundamental underlying issue that needs to be resolved before the project can move forward," she said.

"Recently there is renewed hostilities in Afghanistan which of course is not only a physical safety issue but certainly it does not move forward resolving the first issue of financing."

Mrs Covington says Unocal will soon meet other members of the Central Asia Gas consortium, CentGas, to consider its next move. Unocal, which has teamed up with companies from Saudi Arabia, Pakistan, Turkmenistan, Japan and Korea, believes the project is both economically and technically feasible and can still be carried out once a stable government is in place in Kabul.

Energy analysts, though, say the US missile attacks on Afghanistan and the financial crises in Russia, which have badly affected Western creditors, may well be the final nail in the CentGas coffin.

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