Page 8 - FSUOGM Week 34 2021

FSUOGM COMMENTARY FSUOGM

China finally shows interest

in more Turkmen gas

In return for the gas, CNPC will build new wells at the giant Galkynysh field

TURKMENISTAN CHINA’S state-owned CNPC has reportedly For years, there has been an on-again, off-
agreed to expand purchases of gas from Turk- again plan to add a fourth 30 bcm per year string
WHAT: menistan, after years of supplies remaining to the CAC system, which would underpin a
China has agreed to stagnant. growth in Turkmen exports. Unlike the other
invest in Turkmenistan's The company will receive up to 51bn cubic three lines, which run from Turkmenistan
upstream in exchange for metres of gas over the course of three years in through Uzbekistan and Kazakhstan, this one
more gas supplies. exchange for helping Turkmenistan increase will pass from Turkmenistan through Uzbek-
production at the giant Galkynysh field, Reu- istan, Tajikistan and then Kyrgyzstan before
WHY: ters reported on August 25 citing a source and entering China.
It marks the first time a local media report. CNPC will drill three wells The new deal on extra supplies is unlikely to
Bejinig has shown at the field over the next 30 months, each flowing have any impact on whether the fourth string
interest in increasingly around 3mn cubic metres per day, according to goes ahead. Kazakhstan has had difficulty
supplies from the Central the news agency. sending as much gas to China as it would like,
Asian state in years. In June, local state-run news outlet Business while Uzbekistan is actively looking to reduce
Turkmenistan reported that CNPC had won a shipments to China over the coming years, in
WHAT NEXT: tender to sink the wells under a service contract order to use more gas at home for power gener-
The increase is unlikely to it has with the Turkmen government. ation, petrochemicals and other industries. Any
have any implications for Turkmenistan is already one of China’s increase in Turkmen volumes is therefore likely
plans to add a fourth line biggest gas suppliers, taking some 29 bcm to be offset by reductions from other Central
to the Central Asia-China of gas from the Central Asian state last year, Asian suppliers.
gas system. down 14% from the level in 2019. Beijing cut Turkmenistan is also seeking to access other
some of its gas imports after the coronavirus gas markets through two more ambitious pipe-
(COVID-19) virus broke out, sapping Chinese line projects, although neither has made much
gas demand. tangible progress in years. Ashgabat wants to lay
Most of this gas comes from Galkynsysh and a pipeline under the Caspian Sea, which would
other fields controlled by Turkmen state gas firm enable it to feed gas into the Southern Gas Cor-
Turkmengaz. CNPC has played a crucial role in ridor (SGC) system that stretches from Azerbai-
developing the project but only as a service con- jan to Southeast Europe. But the pipeline seems
tractor rather than an operator. But some sup- unlikely to materialise, given opposition from
plies also come from the Bagtyarlyk block, which Caspian littoral states Iran and Russia, and ques-
is operated by CNPC under a production-shar- tionable commercial logic.
ing contract (PSC). The second project is of course the long-dis-
The gas is sent to China via the Central Asia- cussed Turkmenistan-Afghanistan-Pakistan-In-
China (CAC) gas pipeline system, which consists dia (TAPI) pipeline, which would carry up to
of three strings with a combined throughput 33 bcm per year of Turkmen gas to south Asia.
capacity of 55 bcm per year. The first string came The project has never really got off the ground
online in 2010, providing Turkmenistan access because of difficulties obtaining funding,
to a major gas market other than Russia for the although Turkmenistan claims to have com-
first time. pleted some of its sections in its territory.
In addition to Turkmen gas, CAC also car- Concerns about TAPI have largely centred
ries supplies from Kazakhstan and Uzbekistan, on its proposed route through restive Afghani-
though in far smaller quantities. stan. The Taliban, which has seized the country
in recent months, has said in the past it supports
Implications the pipeline. But Afghanistan’s renewed isolation
Turkmenistan has been pushing to send more under the group’s rule is likely to seal TAPI’s fate,
gas to China for many years, but Beijing has as it will be even harder for the project to secure
been reluctant to increase shipments, wary of financing.
relying too much on a single supplier. Besides the Furthermore, India and Pakistan seem to
political risk that this would entail, China would have little faith in TAPI being realised. Both are
rather buy more flexible LNG volumes rather expanding their regasification capacity, viewing
than commit to a necessarily long-term contract LNG imports as a more viable option for their
for extra Turkmen gas. energy needs. ™

P8 www. NEWSBASE .com Week 34 25•August•2021