ANALYSIS: Turkmen Gas Deal Extends Chinese Influence
by BBC Monitoring research in English 25 Jul 07    BBC Monitoring Central Asia
Wednesday, July 25, 2007
Turkmenistan earlier this month granted a Chinese firm permission to develop land-based gas fields near the Uzbek border, the first time the Central Asian republic has entered into such an arrangement with a foreign company. During a visit to China, Turkmen President Gurbanguly Berdimuhamedow also signed an accord to speed up implementation of an existing Turkmen-Chinese gas pipeline project.

The two agreements mark the latest stage in a shift in Turkmen policy. Turkmenistan has long been dependent on Russian-bound pipelines for its gas exports. With this new deal, Berdimuhamedow is continuing to keep his country's options open on new routes to markets in China, Pakistan and Europe.

The pipeline project may also help China gain more influence in Central Asia by giving it a key role in the future of gas deliveries to Kyrgyzstan, Tajikistan and southern Kazakhstan. China's deals with Central Asian states, in particular Turkmenistan, suggest it believes it cannot rely on Russian promises of natural gas from Siberia, and is prepared to compete with Russia and Central Asia.

Agreements in Beijing

The agreement on the gas fields was signed during Turkmen President Gurbanguly Berdimuhamedow's official visit to China on July 17-18. According to the Russian news agency ITAR-TASS, the State Agency for the Supervision and Use of Oil and Gas Resources, which operates under the auspices of the Turkmen presidency, signed a production-sharing agreement with the China National Petroleum Corporation (CNPC) in Beijing on July 18. The gas-rich Bagtyyarlyk area, situated on the right bank of the Amu Darya river near the Uzbek border, was designated a contract territory under the agreement.

The pipeline project that the two sides are planning to accelerate was agreed last year. Turkmenistan is contracted to supply China with 30 billion cubic meters of gas a year for 30 years, with the Chinese to fund the costs of construction "using its own financial resources". But the field's location and the pipeline route of future Turkmen gas exports to China were not disclosed at the time.

According to Turkmen, Kazakh and Chinese media reports, the pipeline is due to start on Turkmenistan's eastern border with Uzbekistan. The Uzbek section of the pipeline will be about 530 km long, the Turkey-based website reported on May 9, 2007.

Breaking Russia's monopoly

For Turkmenistan, with its estimated 22,000 billion tonnes of fuel equivalent and almost no export routes except via Russia, the deal with China is essential if it is to break its dependence on transit through Russia.

The country has relied for a long time on Russian-bound pipelines for its gas exports. This makes it imperative for Asgabat to maintain good relations with Moscow, which has not always been guaranteed. In 2004 there were disagreements between Turkmenistan, Russia and Ukraine over gas prices. The Russian news agency ITAR- TASS reported then that Turkmenistan had even stopped gas supplies to Russian and Ukraine at the end of that year. The same agency reported on January 4, 2005, that Turkmenistan had signed a one-year contract to supply Ukraine with 36 billion cubic metres of gas, with Ukraine agreeing to a price increase from US$44 to US$58 per 1,000 cubic metres. "We are also conducting talks with Russia's Gazprom on delivering gas at the price of US$58 per 1,000 cubic metres of gas in 2005. We cannot sell gas from the same gas transportation system at different prices," the news agency quoted Saparmyrat Nyyazow, Turkmen president at the time, as saying.

The new pipeline is believed to be the first non-Russian route for gas exports out of landlocked Central Asia. Berdimuhamedow, who took charge of the country last December after the death of long- time ruler Nyyazow and has since won a presidential election, has promised Russia extra gas supplies. But he has also kept Turkmenistan's options open on new routes to markets in China, Pakistan and Europe. "Without joining political alliances, we will proceed with new gas pipelines to carry our gas to China, and to Pakistan and India via Afghanistan and to Europe via the Caspian Sea," Berdimuhamedow said in remarks broadcast by Turkmen TV on June 29.

During his recent visit to China, Berdimuhamedow urged the authorities in Beijing to ensure the project is completed ahead of schedule, and invited Chinese companies to join oil and gas exploration work in Turkmenistan's western offshore areas.

The Turkmen media are reporting regularly on the ongoing construction of gas purifying facilities, power supplying lines, auxiliary roads and pipelines, all scheduled to be ready in time for gas supplies to China to commence in early 2009.

Chinese foothold

China, the world's fastest-growing energy consumer, is keen to ensure stable supplies of natural gas from Central Asia to ease its dependence on coal and oil. However, there are also political grounds for building a pipeline with Turkmenistan. China wants to increase its influence in Central Asia in competition with Russia, the West, Iran and Turkey. The pipeline from Turkmenistan to China would form the first leg of a wider system also gathering gas from Uzbekistan and Kazakhstan, where the Chinese are also negotiating supply deals.

The pipeline, which would start in the gas-rich Turkmen border area, will go through Uzbekistan, which borders on Kyrgyzstan and Tajikistan, and will then run across southern Kazakhstan to China. It may play a key role in future joint projects for gas deliveries to Kyrgyzstan, Tajikistan and southern Kazakhstan. China may act as the guarantor for stable gas deliveries within, and gas exports from, Central Asia. Having achieved this, China would gain more influence on the countries of the region.

China's envoy to Uzbekistan, Yu Hongjun, told a news conference in Tashkent at the end of 2006 that laying the Turkmenistan- Uzbekistan-China gas pipeline as well as building the China- Kyrgyzstan-Uzbekistan highway and railways were priority projects for China. As for the pipeline, the Interfax-Kazakhstan news agency reported in May 2007 that "initially it is planned that the pipeline will start from Olot, on the Turkmen-Uzbek border, and use the existing sections of the main pipeline Buxoro-Ural, and then the route will pass via the territory of Kazakhstan to the projected Kazakhstan-China pipeline".

China established a firm foothold in the Turkmen energy sector in 2006. Turkmen TV reported in November 2006 that, under a contract worth 152m dollars, China's CNPC would drill 12 boreholes, each up to 5,000 metres deep, in eastern Turkmenistan and other areas. Since then China has repaired some 65 obsolete gas wells in southeastern Turkmenistan.

Beijing's deals with Central Asian states, in particular Turkmenistan, suggest it believes it cannot rely on Moscow's promises to supply natural gas from Siberia to China, and is prepared to battle for influence in Central Asia.

It also indicates that China and the countries of Central Asia are increasingly interested in concluding long-term contracts. Some Russian energy projects in Central Asia, which have stalled for many years, have given rise to suspicions about Russian reliability.

"Huge" gas reserves

Turkmenistan's proven gas reserves stand at about 3,000 billion cubic meters. The country exported some 60 billion cubic metres of gas in 2006, 50 billion of this to Russia and 6 billion to Iran.

Speaking on Turkmen TV in April 2007, Berdimuhammedow dismissed reports that Turkmenistan was unable to meet its international contracts. "Some media outlets like to spread unconfirmed information that Turkmenistan's gas reserves are not known, and that it is doubtful whether Turkmenistan will be able to meet its international commitments, but none of them is right," he said. "In response to such self-interested publications, I can safely say that Turkmenistan has huge reserves of oil and gas. We have enough gas to fulfil all international agreements. We have enough gas to send to Russia, Iran and China and other countries on the world market."

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