WILL CASPIAN OIL HEAD WEST, OR EAST?

The purchase lastweek by China’s National Petroleum Corporation (CNPC) of 60 percentof the equity in Kazakstan’s Aktyubinskmunaigaz oil firmsignaled more than China’s desire to stake its claim in the greatCentral Asian oil game. It underscored the prospect that significantamounts of oil from the Caspian basin could be shipped east intoChina and from there to the Far East, rather than to western Europeand the US.

This possibility was raised by Kazakstani president NursultanNazarbaev during the "Kazakstan Investment Summit" heldin Almaty on June 5. (Interfax, June 5, 6) After announcing thatthe pipeline capacity being developed by the Caspian Oil Consortiumwould be "inadequate" for the large increases in Kazakstanioil output anticipated in the 21st century, Nazarbaev revealedthat CNPC won the Aktyubinskmunaigaz tender in part becauseof the Chinese company’s proposal to construct a new eastward-boundoil pipeline. This 3,000-kilometer mainline, which would requiresome $3.5 billion and 6-8 years to build, would connect the Aktyubinskenergy complex in western Kazakstan with the Karamai deposit inwestern China. From Karamai, the oil would be pumped further eastthrough the Chinese pipeline network, ultimately to be purchasedby South Korean and Japanese energy companies.

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