Kazakhstan Expands Gas Transit Pipeline Capacities and Own Exports to China

Publication: Eurasia Daily Monitor Volume: 9 Issue: 153

(Source: KazMunaiGaz)

The longest section of the Turkmenistan-Uzbekistan-Kazakhstan-China transit pipeline passes through Kazakhstan’s territory: it measures 1,115 kilometers in length, of the total 1,830-kilometer Turkmenistan-China distance. Kazakhstan is adding a dedicated export pipeline for its own gas exports to China. In combination, these developments (alongside planned oil exports) confer to Kazakhstan a major role in China’s energy security calculations.

Kazakhstan is currently transiting Turkmenistani gas to China at an annual rate that should approach 30 billion cubic meters (bcm) by December 2012 (i.e., set for the full calendar year 2013), plus small volumes of Uzbekistan’s gas in transit. The transit pipeline is planned to reach full operating capacity through the parallel Lines A, B and C at 65 bcm per year by December 2015 (presumably from the calendar year 2016 onward) (see EDM, August 9).

On August 6, 2012, the project company Asian Gas Pipeline announced that it has completed the construction of Lines A and B of the transit pipeline on Kazakhstan’s territory. The installation of compressors is planned to be completed by the end of 2012 (Kazinform, Interfax, August 6). A further round of capacity expansion is planned with construction of Line C, in the same corridor across Kazakhstan’s south.

The project company, Asian Gas Pipeline, is a parity joint venture of China’s Trans-Asia Gas Pipeline and Kazakhstan’s Kaztransgaz (fully-owned subsidiaries of China’s National Petroleum Corporation and Kazakhstan’s national holding KazMunaiGaz, respectively). The joint company was established in November 2007 to build and operate this pipeline. Construction work on Kazakhstan’s territory started in July 2008. Lines A and B had commenced below-capacity operations already in December 2009 and December 2010, respectively (Interfax, August 6; www.kaztransgas.kz, accessed August 7).

The pipeline’s capacity on Kazakhstan’s territory is dedicated almost entirely to the transit of gas from Turkmenistan, with small inputs from Uzbekistan and Kazakhstan itself. In September 2011, CNPC and KazMunaiGaz signed the framework agreement on the design, financing, construction, and operation of Line C of the Turkmenistan-China transit pipeline on Kazakhstan’s territory.

Astana and Beijing support an additional pipeline, dedicated to Kazakhstan’s own gas exports to China (as distinct from the Kazakhstan section of the Turkmenistan-China transit pipeline). In June 2010, KazmunaiGaz’s and CNPC’s subsidiaries, KazTransGas and Central Asia Gas Pipeline, signed an agreement to build the Beyneu-Shymkent pipeline as a parity joint venture. Originating in the Mangistau region on Kazakhstan’s Caspian coast, this line connects with the pipeline bound for China, at a junction point near Shymkent in Kazakhstan’s south.

The Beyneu-Shymkent line is planned to be sourced from Karachaganak, Tengiz, and potentially Kashagan, thus relying in part on the capture of associated gas at those oil fields. The pipeline joint venture has started construction work on the line’s two sections in December 2010 and September 2011, respectively, budgeting $1 billion and planning to borrow nearly $3 billion for this project. The 1,475-kilometer pipeline route is longer than Kazakhstan’s section of the Turkmenistan-China transit pipeline. The Beyneu-Shymkent line is expected to go into operation in two phases, with a capacity of 10 to 15 bcm per year when both phases are completed by 2013 and 2015, respectively (www.kaztransgas.kz, www.cnpc.com, accessed August 7).

Gas volumes flowing from the Caspian basin eastward in the years immediately ahead may leave little or no volumes available for a possible trans-Caspian pipeline westward. After Russia, China is now asserting its own priority claims more effectively, to larger-volume gas supplies from Kazakhstan. Barring some unforeseen, major gas discoveries on Kazakhstan’s Caspian coast or its offshore, the planned trans-Caspian pipeline will apparently have to be sourced entirely from Turkmenistan’s vast reserves.

Fast-paced construction of Lines A and B of the transit pipeline to China is a performance that Line C, as well as the Beyneu-Shymkent pipeline, look set to emulate. Successful implementation of such tight construction schedules, on projects of this magnitude, seems to presage on-schedule completion of Kazakhstan’s entire export pipeline system in China’s direction, to the full planned capacity at a similarly fast pace.