Doubts Raised over Kazak-China Gas Pipeline Plan

Institute for War & Peace Reporting

Despite the announcement that work on a major new gas pipeline from Kazakstan to China will start in 2008, it remains unclear whether the Kazaks have sufficient reserves to make it feasible, especially in view of their other supply commitments. NBCentralAsia analysts believe China’s interest in the pipeline route revolves primarily around geopolitical concerns.

Officials from KazMunaiGaz, Kazakstan’s state oil and gas company, used last week’s China Gas Summit 2006 in Beijing to announce plans to start work on the pipeline in collaboration with the China National Petroleum Company, CNPC.

The partners intend to have the pipeline working in 2009, with an initial throughput capacity of 10 billion cubic metres a year, which would be increased to 30 billion cu m a year by 2012.

The project is still at the discussion stage, and no final decision has been taken. The assumption is that it would carry gas from fields in the Caspian Sea and western Kazakstan to China’s Xinjiang-Uighur region.

However, energy analysts warn that the volume of gas available for export to China could prove to be lower than expected. They cite the case of the Atasu-Alashankou oil pipeline, for which the Chinese are now having to seek additional oil, and say the same could happen with this gas project.

Analyst Yaroslav Razumov says Kazakstan has limited potential to produce gas, and there are other, no less important projects that will consume gas and compete with the new pipeline for supplies.

“It is unclear what is going to happen with plans to develop Kazakstan’s petrochemicals industry – that too is going to consume locally-produced gas, said Razumov. “This kind of situation where plans for one project fail to take account of other projects is typical of Kazakstan, and demonstrates the lack of substantial, properly conceived and joined-up policies.

Other commentators believe the Chinese may invest in this pipeline project even in the face of pessimistic predictions, because they want to strengthen their geopolitical presence in Central Asia and advance their energy interests there.

Another argument is that the pipeline could be part of a bigger project to take gas from Turkmenistan to China. That pipeline, which will pass through Kazakstan, is supposed to come into operation in 2009. If that is the case, Russia can be expected to oppose the plan. Moscow currently has a near-monopoly over Turkmen gas exports, and wants to increase the amount it buys.

In addition, the huge gas reserves claimed by the Turkmen authorities have yet to be publicly confirmed by independent foreign experts.

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)