Until this summer the gas game has be seen as battle between Russia and West. Now the world economic crisis and current low price of gas have brought a new player to game in fuel sector - China. With its financial strength China has now had ability to intensify its offensive towards the Caspian Sea energy sources especially in Kazakhstan (especially oil) and Turkmenistan (especially gas). Will the outcome be, that both Russia and Western powers with their companies will lose Caspian oil and gas while it will flow to East? Not necessary but from now on one can not ignore China as key player in region.
As main source related to energy game in Kazakhstan and Turkmenistan I have used Ajdar Kurtov's fine article “SCO Yekaterinburg summit and China’s energy offensive towards the Caspian Sea”
Back in the 1990s Kazakhstan made easily available its mineral wealth to American, British, French and Italian companies. The bulk of the profit generated was channeled to Kazakhstan’s new partners. A threat loomed large of Kazakhstan turning into a third-world country with a raw exports role to play for the highly-advanced states.
However, Kazakhstan growing stronger economically, socially and politically while the world hydrocarbons market prices shooting up early this century made Kazakhstan leaders think better of their old stands. The new conditions prompted Kazakhstan to reconsider the earlier signed agreements, and Astana specifically proclaimed the objective of establishing state control over the oil and gas sector. The Kazakh authorities brought pressure to bear on the foreign companies in a bid to force the latter to accept changes to the earlier signed contracts.
The national company “KazMunaiGaz” was made responsible for advancing Kazakhstan’s state interests in the oil and gas field institutionally. Initially Kazakhstan leaders applied much the same tactic to pursue the same objective to one of Kazakhstan’s three oil refineries, the Pavlodar refinery, which is located by the Russian border and technologically oriented to Russian oil refining. The facility was privatized in January 1997 and the government’s stake placed in management by the US CCL Oil Ltd. Company on the terms of a public-private partnership agreement. But the Kazakh government prematurely terminated the agreement a few years later and handed over a 51% stake to the OAO “Mangistaumunaigaz”. The company later brought its stock of shares to 58%, with 42% of the Pavlodar oil refinery’s stock capital owned by the state. After that the national company “KazMunaiGaz” bought 51% of the “Mangistaumunaigaz” stock of shares from Indonesia’s Central Asia Petroleum and consequently gained control over the facility.
It was reported on the 16th of April 2009 that amid the world economic crisis Kazakhstan borrowed from China 10 billion dollars during N. Nazarbayev’s visit to Beijing. The Chinese CNPC Company bought a 50% stake of “Mangistaumunaigaz” for 1.4 billion dollars. Kazakhstan leaders are ousting western partners from the hydrocarbons market and refusing to meet Russian companies halfway, while losing ground to China. Chinese companies already own a third of Kazakhstan-produced oil, or more than 20 million tonnes per year. The purchasing of Kazakhstan’s “Mangistaumunaigaz” assets by China’s CNPC further tightens China’s grip on the Kazakh oil market and weakens the positions of Russia and the West in Kazakhstan’s fuel and energy complex.
China’s policy of advancing towards the Caspian Sea region resources is seen also in Turkmenistan. Ashgabat has long discussed the construction of a 6,500 kilometer gas pipeline from Turkmenistan to China to Japan. The construction project was due to be carried out in 10 years and was pretty costly (11 billion dollars, of which some 1.7 billion dollars would account for the sea section of the pipeline). Later the easterly direction of Turkmen natural gas deliveries was sort of “updated”, namely the option for laying a pipeline to Japan was dropped, with China having been made the only terminal point of delivery.
A more important development for Turkmenistan in 2006 was the republic’s president S. Niyazov’s visit to China in early April. The main agreement in a package he signed in Beijing was the General intergovernmental agreement on the implementation of the Turkmenistan – China gas pipeline project and on selling natural gas from Turkmenistan to the People’s Republic of China in the volume of 30 billion cubic metres annually for 30 years since the time the gas pipeline was commissioned, which was due in 2009.
The new Turkmenistan-China gas pipeline will be nearly 6,500 kilometres, with over 180 kilometres due to be laid in Turkmenistan, 530 kilometres, - in Uzbekistan, 1,300 kilometres, - in Kazakhstan, and over 4,500 kilometres, - in China. The overall cost of the project makes up some 20 billion dollars. 17 billion cubic metres of Turkmen gas were due to be annually exported through the development of new gas fields, while the remaining 13 billion cubic metres of annual gas exports,- through the construction of gas purification and treatment plants at the largest gas condensate field Bagtyyarlyk.
The construction of the pipeline (Turkmenistan-China) got under way in 2008 when Russian Company “Stroytransgaz” won 395 m€ contract for laying the Turkmen section of project and also plant to purify and dehydrate gas and a gas-measuring station. The Turkmen stage is expected to be finished by December 2009 and the entire pipeline in late 2010.
On February 21st 2009 the Iranian and Turkmeni governments signed an agreement that will give Iran the rights to develop the Yolotan gas field in Turkmenistan. The deal will help Iran resolve gas supply problems in its north-eastern provinces. Turkmenistan will sell Iran an additional 350 billion cubic feet of gas annually, more than doubling current supplies of almost 300 bcf a year, according to the agreement first disclosed by Iran’s official media and later confirmed by Turkmenistan.Iran also recently offered to invest $1.7 billion for a 10 percent stake in the second phase of Azerbaijan’s huge Shah-Deniz gas field which will come on line by 2014. Iran already has a 10 percent share in the first phase and it wants to import large volumes of gas from the Azeri field. For Iran, the deals couldn’t be better suited to its objectives. It’s economically unviable currently to supply gas to its isolated, north-eastern third of the country. Getting gas from Turkmenistan would therefore make more Iranian gas available for export to Turkey.
The Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline on the other hand would feed natural gas into downstream economies that are desperate for natural gas supplies. Afghanistan is the first of these, and energy shortages are rarely discussed as one of the problems of their economy, but with only 10 - 12% of the populace having access to electricity and with only limited natural gas resources (perhaps enough for a 100 megawatt power station), the country needs to import natural gas in large volumes. Pakistan is still desperate for help with natural gas and other energy fuels. But so far there is no pipeline to help.
There is some base to claim that U.S.military's involvement in Afghanistan is directly related to the large reserves of natural gas in Turkmenistan. While the U.S. military may be a wholly owned subsidiary of the international (i.e. American and British)oil companies), its anyway clear that demand to increase troop levels in Afghanistan jumped a bit along with the recently publicized discovery of the very large large natural gas reserves in the Yoloten-Osman gas field in southern Turkmenistan.