China Taps Central Asian Gas

China presses into Central Asia with the opening of its first import gas pipeline from Turkmenistan.
By Michael Lelyveld
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BOSTON—China is set to tap a major new energy source with the opening of a gas pipeline from Central Asia by the end of the year, experts say.

Dismissed as impractical a decade ago, the 2,000-km (1,240-mile) link from Turkmenistan is scheduled to start pumping gas in mid-December, becoming China's first import pipeline for the clean-burning fuel.

The route through Uzbekistan and Kazakhstan is part of a 7,000-km project that will supply gas to China's central and coastal cities at a cost that could top $20 billion (136 billion yuan).

Analysts say the opening marks a major move for China into Central Asia.

"It is a big change for China," said Martha Olcott, senior associate at the Carnegie Center for International Peace in Washington. "China is going into Central Asia much more quickly than they thought they would."

Olcott said a lot has changed since the project of state-owned China National Petroleum Corp. (CNPC) was first proposed in the 1990s.

Russian influence wanes

Export alternatives have been limited for Central Asian nations following their independence from the Soviet Union. Russia has dominated their exports with Soviet-era pipelines, while Iran has provided only a limited option for Turkmenistan.

Gas prices have also grown dramatically during the decade despite recent declines. And China's demand for gas has risen sharply, doubling between 2004 and 2008 from 40 billion to 80 billion cubic meters (1.4 to 2.8 trillion cubic feet), according to BP Statistical Review of World Energy.

Olcott told Radio Free Asia that China has moved into the region as Russia's influence has waned.

"They're perceiving Russia's decreased economic capacity. I think that China thought Russia would be much more actively engaged in Central Asia for much longer," she said.

The push for the project has developed for over a decade. Turkmenistan's former president, Saparmurat Niyazov, sealed a 30-year deal to supply China with gas shortly before his death in 2006.

But Turkmenistan's search for non-Russian routes dates as far back as 1997, when a feud with Russia halted all Turkmen gas exports, said S. Frederick Starr, chairman of the Central Asia-Caucasus Institute at Johns Hopkins University.

The cutoff came after Russia steered Turkmenistan's gas to debtor countries like Georgia while blocking access to cash-paying markets in Europe. The standoff badly hurt the Turkmen economy and spurred Niyazov to look for new export routes.

"We're used to thinking about how aggressive the Chinese are. I think in this case you have as much or more initiative coming from Ashgabat," Starr said.

In 2003, Russia mended fences with Turkmenistan and signed a 25-year deal for supplies. But disputes over prices continued, so that promised volumes were never realized.

Then, last April, Russia's Gazprom abruptly cut its gas imports from Turkmenistan again when demand dropped due to the recession.

No Turkmen gas has flowed through Russia since then, despite talks between Gazprom and Turkmen President Gurbanguly Berdymukhammedov.

China 'more dependable'

Starr argued that Russia has driven Turkmen exports into the arms of China, which offers a more dependable market.

"This project ultimately was created in Moscow," Starr said.

It is still unclear whether a such a long and costly pipeline is commercially viable.

But the question seems less important to China now than a decade ago, said Robert Cutler, research fellow at the Institute of European, Russia and Eurasian Studies of Canada's Carleton University.

"The answer doesn't quite matter because China is energy-hungry and they have been taking losses for the past decade on long-term projects," Cutler said.

China's growing economy has fed its energy demand. At the same time, it has amassed over $2 trillion in hard currency reserves, driving it into big energy investments, said Cutler.

"I don't think they have a choice whether they want to take a loss or not," he said.

The gas project is China's second pipeline from Central Asia following the opening of an oil line from Kazakhstan in 2005.

CNPC is also working on its first oil pipeline from Russia, expected to open next year.


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