Page 10 - FSUOGM Week 19 2020

FSUOGM COMMENTARY FSUOGM
Long-term prospects
The Chinese gas slowdown, as well as the coun- try’s weaker economy as a result of the pan- demic, will have longer-term implications for Central Asian gas.
China is by far the biggest market for the region’s gas, with Russia being a distant second. And Turkmenistan’s ambitions to establish new export routes to Europe and southern Asia are unlikely to come to fruition, given the political and commercial obstacles.
China receives Central Asian gas via the 55 bcm per year Central Asia-China Pipeline (CACP) system. Shipments have steadily risen in recent years, reaching 47.9 bcm in 2019. Cen- tral Asian authorities have already suggested that CACP could reach full capacity by the early 2020s, which would prompt Beijing to look more seriously at the construction of a fourth 30 bcm per year string.
This project, known as Line D, has been under discussion for over a decade. Even before COVID-19, China showed little enthusiasm for its development owing to weaker economic per- formance and softer gas demand growth. The pandemic makes it even less likely that Line D will make any substantial progress in the next few years.
This said, the long-term trajectory for gas demand in China is still solid, given Beijing’s aggressive push to replace more coal with gas in
the power and heating sectors. In its latest 2050 outlook, published in August last year, state- owned CNPC forecast that Chinese gas demand would surge from 283 bcm in 2018 to 610 bcm by 2036 and then 690 bcm in 2050. The producer concedes that domestic supply will lag behind substantially, rising from 161 bcm in 2018 to only 300 bcm in 2035 and 350 bcm in 2050.
In light of this growing shortfall, it seems that Line D’s construction is not a matter of if but a matter of when. The next question is where the gas will come from to fill its capacity.
Of the three Central Asian producers, only Turkmenistan has the resource base to support increased supplies to China over the long term. The country is endowed with the fifth biggest proven gas reserves in the world, estimated by BP at 19.5 trillion cubic metres. But it produced amere61.5bcmofgasin2018–alevelitcouldin theory maintain for more than 300 years.
In contrast, Uzbekistan wants to lower its gas exports to zero over the next decade, shifting its focus to processing gas domestically instead. The country is pushing ahead with several down- stream gas projects, including a 3.6 bcm per year gas-to-liquids (GTL) plant due on stream later this year, and the expansion of the Shurtan gas chemical complex. Kazakhstan also wants to move into gas-based petrochemicals, and it is in the midst of a large-scale investment programme to achieve nationwide gasification. ™
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Week 19 13•May•2020