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Central Asia-China Pipeline: Who's the True Winner?

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China strategizes to maintain its regional domination and Turkmenistan barrels through as the underdog.

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Editor's Note: This article was written by Philip H. de Leon of OilPrice.com, which offers free information and analysis on energy and commodities. Philip focuses on fossil fuels, alternative energy, metals, and geopolitics.


On December 14, 2009, an inauguration took place that deserves more attention than it received because it marks an economic power shift to the benefit of three Central Asian countries and China and to the detriment of Russia.

Hu Jintao, the presidents of China, Gurlanguly Berdymukhamedov, the president of Turkmenistan, Nursultan Nazarbayev, the president of Kazakhstan, and Islam Karimov, the president of Uzbekistan, inaugurated the Central Asia-China gas pipeline that links Turkmenistan's natural gas fields on the Caspian Sea to the Western Chinese border in the Xinjiang province.

This pipeline then connects with the West-East Gas Pipeline that crosses China and supplies cities as far as Shanghai and Hong Kong. Thirteen billion cubic meters (bcm) are supposed to transit through this pipeline in 2010, 30 bcm by the end of 2011, and more than 40 bcm by 2013.

Ultimately that pipeline could supply China with more than half of China's present-day natural gas consumption.

Diversification of gas export routes seen as a regional security factor

Most commentators and officials have steered clear from saying openly that Russia is losing ground in Central Asia because of political sensitivities.

Despite years of recurrent official declarations that there are no spheres of influence -- with the word "influence" being astutely replaced by the word "interest" -- there's a delicate balance of powers in the region with historic, cultural, and economic ties that can't be ignored.

There's also the need to accommodate the growing interest in the region of new players, such as China, the United States, and the European Union.

Russia sees the region as its natural backyard, but many countries no longer consider Russia as the most rewarding partner or one that should always have the upper hand.

Turkmenistan is the big winner with this pipeline as this new export route for its gas production frees it from the diktats of Gazprom -- about 70% of its natural gas production used to exit the country through the Gazprom network.

Turkmen President Berdymukhamedov stated, "The successful implementation of this project could become a prototype for all international energy partnerships," adding that "this pipeline will have a positive impact across the entire region and beyond, and it will become a major contributing factor to security in Asia."

Other winners are Uzbekistan and Kazakhstan, which will also be able to supply the pipeline with their own gas production, notably from the Karachaganak, Kashagan, and Tengiz fields in Kazakhstan.

The Central Asia-China gas pipeline is a $7.3 billion project, 1,833 kilometers long with 188 kilometers going through Turkmenistan, 530 from Uzbekistan to Kazakhstan, and 1,115 kilometers from Kazakhstan to China. The West-East Gas Pipeline crossing China is more than 4,500 kilometers long, making the joint pipelines the longest in the world.

A new natural gas player: Turkmenistan

In 2008 the independent British auditing company Gaffney, Cline & Associates was tasked with assessing the volumes of Turkmen gas reserves in the Yoloton-Osman fields. Despite allegations that Turkmen officials -- which included the heads of Turkmengas, Turkmenneft, and Turkmenneftegazstroy -- misled the auditors by providing inaccurate inflated data, it remains reasonable to believe that Turkmenistan holds the fourth or fifth largest natural gas reserves in the world in light of regularly announced gas discoveries in regions with already proven reserves. President Berdymukhamedov himself sacked the Turkmen officials entangled in this scandal in October 2009.

The problem for Turkmenistan until now was that its export routes were limited because more than 70% of its gas exports transited through Gazprom's pipelines.
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