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    Central Asia
     Oct 8, 2010

CNPC adds fuel to Turkmen ties
Robert M Cutler

MONTREAL - China National Petroleum Corporation (CNPC) has announced the discovery of yet another gas field on the right bank of the Amu Darya River in Turkmenistan, holding in excess of 100 billion cubic meters (bcm) of gas.

Separately, Turkmenistan President Gurbanguly Berdimuhamedow inaugurated a new compressor station at the Bagtiyarlyk fields, estimated by Chinese engineers to hold 1.6 trillion cubic meters of natural gas.

These fields feed the Turkmenistan-China pipeline, which traverses Uzbekistan and Kazakhstan and was opened in December 2009 with a projected capacity of 40 billion cubic


meters per year (bcm/y) by 2015, with some of that volume being consumed in southern Kazakhstan. (See Gas pipeline gigantism, Asia Times Online, July 17, 2008.)

In June this year, Ashgabad and Beijing agreed to increase Turkmen exports to China above the agreed level; the new compressor station will eventually raise the existing capacity to 22 bcm/y from the 6 bcm/y estimate of Chinese consumption of Turkmenistan-sourced gas for 2010.

This development is only one of a continuing series of events confirming the implementation of Turkmenistan's energy reorientation away from Russia. (See Tectonic shift under way in Turkmen gas, Asia Times Online, May 28, 2010.) Thus a series of meetings among heads of government in the margins of the UN General Assembly Meeting in New York last month has continued to accelerate movement in the direction of seeking to realize the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline.

Reports in the Indian press over the past month indicate that New Delhi is now following through strongly on its earlier expression of interest. Most interesting is the report that the four partners are seeking to recruit a major international energy firm to discuss costs in greater detail, with a view towards actual construction. The name, or even the nationality, of this firm has not even been hinted at openly.

Berdimuhamedow has begun to tout the TAPI as an important instrument for the economic reconstruction of Afghanistan, and he has been accelerating efforts at the diplomatic level to give definite form to a multilateral framework agreement for the pipeline project. In the best of all possible worlds, such a document could be approved by early next year. This would be a landmark development, but still only the first step on a long road.

China has meanwhile continued to exert its magnetic attraction on Russian energy resources, with the opening of the Skovorodino-Daqing oil pipeline. (See China on buying and lending spree, Asia Times Online, March 5, 2009.) This realizes intent of the mid-February 2009 accord whereby China lent Russia US$25 billion in return for construction of the East Siberia-Pacific Ocean (ESPO) oil pipeline from Skorovodino (eastern Siberia) to the Chinese border.

With the spur on the Chinese side of the border to the longtime e energy-sector city of Daqing, the entry into service of the ESPO pipeline for export to China shows that the two countries intend to cooperate over geo-economic issues despite any tactical disagreements over implementation of their growing entente in other spheres.

The Skovorodino-Daqing pipeline will deliver 300,000 barrels per day (bpd) to China over 20 years. For sake of comparison, this is a little less than one-third of the design capacity of the Baku-Tbilisi-Ceyhan (BTC) pipeline from Azerbaijan through Georgia and Turkey to the eastern Mediterranean.

Although the strategic cooperation between the two countries transcends the energy sector, nevertheless as the newspaper The Australian noted, "The driving force behind the improving ties … is a convergence of energy interests." Indeed, just last month Russia also agreed on terms for a Chinese loan of $6 billion in exchange for coal exports over the next quarter-century.

At the same time, a gas pipeline project between the two Asian giants lingers on the sidelines. Gazprom and CNPC signed an agreement on strategic cooperation in October 2004, and at the same time a Memorandum of Understanding (MoU) was signed at the level of head of state for development of two pipelines for natural gas.

In 2007, the Russia created the Eastern Gas Program (EGP) as a state program to unify gas production and export activities, but the so-called "Altai gas pipeline" was not included on the website of Gazprom, the Russian gas monopoly which the ministry of industry and energy designated to realize the EGP. ( See Price limit on China's Russian friendship, Asia Times Online, October 16, 2009).

The contract predicted for mid-2010 by Deputy Prime Minister Igor Sechin has not materialized. The pricing scheme remains a major sticking point: Russia wants to set it in relation to the cost of oil, as it does with Europe, but China seeks lower prices than that. Beijing, notably, is not offering concessionary loans such as it agreed in connection with construction of the ESPO pipeline for oil.

Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.

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