Turkmenistan Gas is now flowing to China Overland

Turkmenistan Gas is now flowing to China Overland

With one flick of a switch, Russia's long-standing dominance and near monopoly over Central Asian natural-gas exports officially came to an end on Monday.

The Turkmenistan-China pipeline, which will carry natural gas from eastern Turkmenistan through Uzbekistan and Kazakhstan into China's northwestern Xinjiang region, went on line on December 14 during an inauguration ceremony attended by regional leaders. It marks the first time in more than a decade that a pipeline has been constructed to pump gas out of the region, and is the biggest effort to date to export Central Asian gas without using Russian routes.

The ceremony in Samandepe, the starting point of the 1,833-kilometer pipeline that originates in Turkmenistan's gas-rich but previously untapped east, took place just over three years after the China-funded project was agreed upon.

Turkmen President Gurbanguly Berdymukhammedov called the launch of the new pipeline "a new chronicle in the relations of our countries" that "will stand as a golden page" in their history.

Joining the Turkmen president to witness the event were the presidents of China, Kazakhstan, and Uzbekistan - Hu Jintao, Nursultan Nazarbayev, and Islam Karimov, respectively - whose countries are all involved in the project.

Quite a bit bigger

Jennifer DeLay, editor of "FSU Oil And Gas Monitor," a weekly publication from the Scotland-based Newsbase Group, says the significance of the new route rests primarily in the fact that it is the first high-volume export route opening up for Turkmenistan that does not go through Russia.

DeLay notes that a gas pipeline connecting Turkmenistan to northern Iran was constructed in 1997. But she says its rather modest annual capacity of 8 billion cubic meters (bcm) of gas pales in comparison to the new route to China.

"Sea transport has its own pitfalls; a lot of it has to go through the Straits of Malacca, which is infested with pirates ... The pipeline from Turkmenistan, by contrast, is going overland and is a little bit easier to predict and protect.

"That's still pretty small compared to the one they [Turkmenistan] have to Russia, which is handling upward of 50, 60, 70 bcm per year," DeLay says. "The new pipeline to China is going to be handling 30 to 40 billion cubic meters a year, and that's quite a bit bigger than 8 [billion bcm]."

According to plan, the Turkmenistan-China pipeline's full capacity of 40 bcm should be achieved by 2012, but Turkmenistan and China have already signed preliminary agreements to add another 10 bcm eventually.

Russian energy giant Gazprom is contracted to purchase between 50 to 65 bcm annually from Turkmenistan, accounting for about 90% of the Central Asian country's gas exports.

But since an explosion along the pipeline connecting Turkmenistan to Russia in April, no gas has been flowing, stoking tensions between the two countries and leading Turkmenistan to speed up efforts to find alternative export avenues.

The two sides are close to agreement on renewing supplies, but when the flow of gas does resume Gazprom's share of Turkmen gas will have fallen to just over 50% as a result of the new China route and others expected to go on line soon.

A new pipeline to Iran, due to be launched later this month, will eventually send another 8 bcm to Iran, with plans to add 4 bcm more, bringing the total slated for the Turkmenistan's southern neighbor to 20 bcm.

The Turkmenistan-China pipeline is also due to take some gas from Uzbekistan and Kazakhstan to China. Uzbekistan has already said it is contracted to provide 10 bcm to the project. A second section of the pipeline that will extend through Kazakhstan from north of the Aral Sea to China - the Beyneu-Bozoy-Kzylorda-Shymkent pipeline - will provide 10 bcm of Kazakh gas.

During a visit to Kazakhstan on December 12 en route to Turkmenistan, Chinese President Hu attended the opening of the Kazakh-China spur of the pipeline and held discussions with Kazakh President Nazarbayev.

In the Turkmen capital, Ashgabat, ahead of this week's ceremony, Hu said the new pipeline will benefit all countries in the region, and expressed China's interest in continued cooperation with Central Asian states in the development and transportation of energy resources.

So much the better

DeLay of "FSU Oil And Gas Monitor" explains that China has a keen interest in diversifying its energy sources.

"China is looking, at this point, to gasify as much of its economy as possible," she says. "To date it's dependent mostly on coal, which is of course a much dirtier burning fuel, and they're looking to switch over to gas. At present, gas still accounts for a fairly low share of total energy consumption, I believe it may still be less than 10%.

"So at the moment they're looking for gas from pretty much any source they can get it, and if they can get it through a secure overland pipeline, so much the better."

DeLay says the new Turkmenistan-China route fits the bill.

"One of the big attractions of the pipeline from Central Asia is that it's an overland route. A good amount of the gas that China has started buying lately has come from overseas in the form of LNG [liquefied natural gas], which has to be brought in by tankers," DeLay says.

"Sea transport has its own pitfalls; a lot of it has to go through the Strait of Malacca, which is infested with pirates, and there's some other security concerns. The pipeline from Turkmenistan, by contrast, is going overland and is a little bit easier to predict and protect."

The opening of the new pipeline could also have a ripple effect, as Central Asia's gas-exporting states consider offers to join projects leading west to Europe. The European Union-backed Nabucco gas pipeline aims to carry 31 bcm annually and would be nearly twice as long as the Turkmenistan-China pipeline. So far, however, Central Asian leaders have been hesitant to sign contracts to fill the Nabucco pipeline. That may be about to change.

One of Nabucco's shareholders, Germany's RWE Dea, in July was awarded the rights to explore Turkmenistan's offshore gas fields in the Caspian Sea. In October, the company opened a representative office in the Turkmen capital, Ashgabat.

Observers see RWE's activities as the first steps in securing Turkmen gas for Nabucco. And for Nabucco shareholders and supporters, the example of the new Turkmenistan-China going online demonstrates with certainty that it is possible to build a high-volume pipeline that avoids Russia.