Turkmenistan to boost gas exports to China
By Robert M Cutler
MONTREAL - Turkmenistan has agreed to increase future natural gas exports to
China from the already planned 40 billion cubic meters per year (bcm/y) to 65
bcm/y, or more than half of China's total consumption of natural gas.
President Gurbanguly Berdimuhamedow of Turkmenistan is in Beijing this week to
sign over a dozen agreements with his Chinese counterpart, Hu Jintao, including
several that will provide also for increased Chinese investment and sales of
drilling equipment in the energy sector, and loans for those purchases.
The agreements that Berdimuhamedow signed in Beijing provide for further
Chinese investment in the South Yolotan gas field, which is the world's
second-largest, with estimated reserves between 13 trillion and 21 trillion
cubic meters. Other agreements
will cover such areas as police training, and counterterrorism. Berdimuhamedow
will also hold meetings with Premier Wen Jiabao and chairman of the People's
National Congress Standing Committee Wu Bangguo.
On Thursday, Berdimuhamedow will attend ceremonies marking the inauguration of
a US$22 billion pipeline that will carry his country's gas to southern China.
This is the second West-East Gas Pipeline (WEGP). The first was completed in
2004 and, with a length of 4,000 kilometers, was at the time one of China's
largest energy projects. Originally carrying 12 bcm/y from the Tarim Basin in
Xinjiang to Shanghai on the eastern coast, its volume was increased to 17 bcm/y
through the addition of more compressors and upgrading of the industrial plant.
When gas from Turkmenistan came on line via the
Turkmenistan-Uzbekistan-Kazakhstan-China natural gas pipeline in 2009, it was
put into the first WEGP. The gas that originally fed it, from Xinjiang's Tarim
Basin and secondarily from Changqing (Shaanxi province), is now held in reserve
for that purpose in case of emergency. The second WEGP's western segment has
been operating for roughly two years. Berdimuhamedow's visit was timed for the
ceremonial opening of the eastern segment, although it had been operating
already for several months.
The second WEGP cost nearly four times as much as the $5.7 billion that the
first one cost, partly due to increase expense for the raw materials required
to manufacture the pipe. Its main line inside China runs 4,843 km from Khorgos
in northwestern Xinjiang to Guangzhou, the capital of Guangdong province. If
one begins measuring at the source of the gas in Turkmenistan, one gets an
impressive length of 9,102 km, although the WEGP designates only the internal
The second WEGP has a design capacity of 30 bcm/y, which may be upgraded to 40
bcm/y in order to receive gas contracted also from Kazakhstan, through which
the pipeline runs. In the beginning, the Kazakhstani gas will come from Aqtobe
in the west of the country, whence a feeder pipeline runs to Kyzl-Orda and then
to Shymkent in the south.
The Chinese have been active in Aqtobe for well over a decade in anticipation
of this opportunity, and the pipeline inside Kazakhstan will make the southern
part of the country independent of imports (mainly from Uzbekistan) for the
first time in its history. The pipeline will then turn east towards Almaty and
the Chinese border.
Work on a third WEGP has begun. This pipeline will start in Xinjiang and take
mainly Central Asian gas to the Yangtze and Pearl River deltas in Fujian
province in the southeast. It looks to be roughly as long as the second WEGP. A
fourth WEGP is on the drawing boards, and even a fifth is being talked up.
The Russian newspaper Kommersant quoted an unnamed Chinese diplomat as saying
that "Beijing will do its best to make sure the Trans-Caspian [Gas] Pipeline
project [from Turkmenistan to Azerbaijan] is not developed," because China does
not want Turkmenistan to use European prices to bargain for an increase in
prices to China.
Consequently, China will "contract more and more gas volumes in Turkmenistan"
as the Chinese gas market expands, and as soon as possible, in order to draw
supplies away from a possible Western direction for Turkmenistan's exports.
Russia already wishes to charge European prices to China for Siberian gas that
has been under discussion between the two sides since 2004. The gas would have
two routes, one in western Siberia (30 bcm/y) and one in the east (38 bcm/y). A
Siberian contract could be worth as much as $1 trillion, but whereas China has
preferred that the former route be developed first, Russia concentrated on the
latter and opened the Sakhalin-Khabarovsk-Vladivostok pipeline two months ago.
Russia shares with China the wish to prevent Turkmenistan's gas from reaching
Europe, so that Gazprom may maintain its already large market share, which is
set to grow further if the capacity of the Nord Stream pipeline under the
Baltic Sea to Germany is doubled, as has been bruited.
However, one result of the China's increasing purchase contracts with
Turkmenistan may be a further diminution in Chinese interest in Russian gas
from Siberia, which Kommersant cites sources as saying is offered by Moscow at
$400 per thousand cubic meters (tcm). The price of Ashgabat's gas to Beijing,
according to the newspaper, is about $250/tcm. A Chinese press leak a year ago
had put the difference between the two sides in the range of $100/tcm.
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.
(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about sales, syndication and republishing.)