*[Enwl-eng] [China-Global-Info] China prioritising Turkmenistan over Russia in next big pipeline project
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Reuters
24 May 2023 -- China is accelerating the building of a long-delayed Central Asian pipeline to source gas from Turkmenistan even as Russia pushes its own new Siberian connection, as Beijing juggles its energy security needs with diplomatic priorities.
Beijing is keen to bolster Central Asia ties under its Belt & Road Initiative, but nearly a decade after construction began, the "Line D" project has been hobbled by complex price talks and the technical hurdles of laying a pipeline crossing another three central Asian nations, Chinese state oil officials said.
But Moscow's recent push to land its second Siberia pipeline connection with China, the Power of Siberia 2, to make up for shrunken sales in Europe due to the Ukraine crisis, provides Beijing a lever to advance the central Asian project, according to Chinese oil officials and industry consultants.
"Central Asian pipelines are considered a cornerstone investment in China's energy and geopolitical space. It's a supply channel with strategic value that supersedes commercial concerns," a state-oil official familiar with China National Petroleum Corp's (CNPC) global strategy told Reuters.
China may eventually seal both deals to feed its massive long-term gas needs, but is prioritising Turkmenistan, industry officials said, as Beijing has long seen Central Asia as a frontier to expand trade, secure energy and maintain stability in its once-restive western Xinjiang region.
Combined, multi-year contracts worth tens of billions of dollars to bring gas via both pipelines would meet 20% of China's current demand. The pipelines are key to Beijing's goal of using gas as a bridge fuel towards its carbon neutrality targets and also helping to shield it from the volatile tanker-carried liquefied natural gas (LNG) market.
Estimated in 2014 to cost $6.7 billion, Line D would carry 30 billion cubic meters of gas a year.
Speaking last week at the first in-person summit of central Asian leaders in the ancient Silk Road city of Xian, President Xi Jinping urged parties to accelerate laying Line D, which would be China's fourth gas pipeline to the region, almost a decade after the start of construction in Tajikistan.
In 2022, China imported 35 bcm gas or worth $10.3 billion via three pipelines from Turkmenistan, compared with 16 bcm via a single pipeline from Russia at about $4 billion.
'LINE D GETTING READY'
Reflecting renewed urgency, CNPC last week launched the feasibility study for a 200-kilometer connection from Xinjiang's border with Kyrgyzstan to the Chinese town of Wuqia as the first receiving point, said a senior source involved in appraising the project.
"This means D Line is getting ready," the person told Reuters, adding that construction on the domestic trunkline in Xinjiang could begin next year.
Separately, a CNPC official told Reuters last week that the company's commercial teams are "standing by" awaiting a mandate to advance the project, without elaborating.
Without a final gas supply contract, CNPC has only built part of the first tunnel in the mountainous Tajikistan capital Dushanbe where Line D begins, the official said.
China's state planner the National Development and Reform Commission did not immediately respond to a request for comment.
A CNPC spokesperson declined to comment.
Consultancy SIA Energy and Rystad Energy predicted new Turkmenistan gas via Line D could start flowing around 2028 while a new Russian line, designed at 50 bcm a year that sources gas from West Siberia, could start operating in the early 2030s.
IMPORT LOSSES
China is paying some 30% more for Turkmen gas, delivered via three existing pipelines since 2009, than from Russia, which began pumping the fuel from East Siberia in late 2019, Chinese customs data showed.
Facing years of import losses as it is unable to pass on the cost to a regulated domestic market, CNPC has failed to negotiate a lower price for Turkmen fuel in rounds of price reviews, a second industry source with knowledge of the matter told Reuters.
Ashgabat wanted to be paid "in line with global pricing practices", a Turkmenistan official familiar with the talks said.
Sources and officials declined to be named as they are not authorised to speak with media.
RUSSIA OVERTURES
Still, the price negotiations are likely to be complex as China has multiple supply options that also include domestic production and new long-term LNG contracts with Qatar and the United States, said Jason Feer, Houston-based head of business intelligence at consultancy Poten & Partners.
"The prices need to be high enough to justify the expense of building an expensive pipeline but low enough to be competitive," said Feer.
Moscow's recent overtures to fast-track the shorter Power of Siberia 2 connection, via Mongolia, and a more recent proposal by Almaty to supply China via Khazakhstan offered CNPC leverage in finalising the Turkmen link, said the CNPC official and the second industry source.
"CNPC could use the Russian proposals to bargain for a better price for Line D while taking its time to discuss new Russian supplies," said the second source.
Factbox: China's main import gas pipelines
China, the world's third-largest gas buyer, imports the fuel in gaseous form via long-distance pipelines from three sources - central Asia, predominantly Turkmenistan, as well as Russia and Myanmar.
Its pipeline gas volumes totalled 45.8 million tonnes in 2022, meeting 17% of China's gas demand.
China separately imported 63.4 million tonnes of tanker shipped liquefied natural gas (LNG) last year, with total LNG imports meeting 41% of Chinese demand.
The remainder of China's gas was sourced domestically.
CENTRAL ASIA
China has since 2008 laid three trunklines at an estimated combined cost of more than $14 billion, connecting gas fields in Turkmenistan to the border with China's northwestern Xinjiang region.
Lines A and B start at the border of Turkmenistan and Uzbekistan, crossing Kazakhstan before entering China at border town Khorgos. Each spans 1,833-kilometers (1138.97 miles) and together they are able to transport 30 billion cubic meters (bcm) of gas a year.
Line C, parallel to A and B, started pumping gas to China in 2014 with designed annual capacity of 25 bcm, though the line has been operating under capacity as domestic pipeline infrastructure lags.
A senior CNPC executive told Chinese media in 2017 that China should have recouped the investment of the three lines within 7.5 years if operating at full throttle.
LINE D
The newest, Line D, starts at Turkmenistan's giant Galkynysh field, one of the largest gas fields in the world with reserves exceeding 21 trillion cubic meters.
The line, which would be the first to also cross Uzbekistan and Kyrgyzstan and Tajikistan, would be 966 km long with annual carrying capacity of 30 bcm. Countries signed preliminary agreements with China in 2013/14.
In September 2014, Chinese President Xi Jinping attended a ceremony in Dushanbe, capital of Tajikistan, marking the start of construction of the D line, state media People's Daily reported then.
The project, however, has been slow in coming due to the complex price negotiations between China and Turkmenistan, technical challenges developing Galkynysh field and difficulties laying the pipelines through the mountainous terrains.
POWER OF SIBERIA 1
Russian gas giant Gazprom began delivering gas to China in late 2019 via the 3,000-km Power of Siberia project linking Siberian fields with northeast China. Supplies reached 16 bcm last year with plans to ramp up to reach 38 bcm by 2025.
The pipeline is part of a 30-year, $400 billion deal signed in 2014, a landmark agreement that marked Moscow's diversifying exports away from its top client Europe.
FAR EAST SAKHALIN PROJECT
In February of 2022 during Russian President Vladimir Putin's visit in Beijing, China agreed to import gas from Russia's Far East island of Sakhalin, via a new pipeline across the Japan Sea to northeast China, with deliveries reaching up to 10 bcm a year around 2026.
POWER OF SIBERIA 2
24 May 2023 -- China is accelerating the building of a long-delayed Central Asian pipeline to source gas from Turkmenistan even as Russia pushes its own new Siberian connection, as Beijing juggles its energy security needs with diplomatic priorities.
Beijing is keen to bolster Central Asia ties under its Belt & Road Initiative, but nearly a decade after construction began, the "Line D" project has been hobbled by complex price talks and the technical hurdles of laying a pipeline crossing another three central Asian nations, Chinese state oil officials said.
But Moscow's recent push to land its second Siberia pipeline connection with China, the Power of Siberia 2, to make up for shrunken sales in Europe due to the Ukraine crisis, provides Beijing a lever to advance the central Asian project, according to Chinese oil officials and industry consultants.
"Central Asian pipelines are considered a cornerstone investment in China's energy and geopolitical space. It's a supply channel with strategic value that supersedes commercial concerns," a state-oil official familiar with China National Petroleum Corp's (CNPC) global strategy told Reuters.
China may eventually seal both deals to feed its massive long-term gas needs, but is prioritising Turkmenistan, industry officials said, as Beijing has long seen Central Asia as a frontier to expand trade, secure energy and maintain stability in its once-restive western Xinjiang region.
Combined, multi-year contracts worth tens of billions of dollars to bring gas via both pipelines would meet 20% of China's current demand. The pipelines are key to Beijing's goal of using gas as a bridge fuel towards its carbon neutrality targets and also helping to shield it from the volatile tanker-carried liquefied natural gas (LNG) market.
Estimated in 2014 to cost $6.7 billion, Line D would carry 30 billion cubic meters of gas a year.
Speaking last week at the first in-person summit of central Asian leaders in the ancient Silk Road city of Xian, President Xi Jinping urged parties to accelerate laying Line D, which would be China's fourth gas pipeline to the region, almost a decade after the start of construction in Tajikistan.
In 2022, China imported 35 bcm gas or worth $10.3 billion via three pipelines from Turkmenistan, compared with 16 bcm via a single pipeline from Russia at about $4 billion.
'LINE D GETTING READY'
Reflecting renewed urgency, CNPC last week launched the feasibility study for a 200-kilometer connection from Xinjiang's border with Kyrgyzstan to the Chinese town of Wuqia as the first receiving point, said a senior source involved in appraising the project.
"This means D Line is getting ready," the person told Reuters, adding that construction on the domestic trunkline in Xinjiang could begin next year.
Separately, a CNPC official told Reuters last week that the company's commercial teams are "standing by" awaiting a mandate to advance the project, without elaborating.
Without a final gas supply contract, CNPC has only built part of the first tunnel in the mountainous Tajikistan capital Dushanbe where Line D begins, the official said.
China's state planner the National Development and Reform Commission did not immediately respond to a request for comment.
A CNPC spokesperson declined to comment.
Consultancy SIA Energy and Rystad Energy predicted new Turkmenistan gas via Line D could start flowing around 2028 while a new Russian line, designed at 50 bcm a year that sources gas from West Siberia, could start operating in the early 2030s.
IMPORT LOSSES
China is paying some 30% more for Turkmen gas, delivered via three existing pipelines since 2009, than from Russia, which began pumping the fuel from East Siberia in late 2019, Chinese customs data showed.
Facing years of import losses as it is unable to pass on the cost to a regulated domestic market, CNPC has failed to negotiate a lower price for Turkmen fuel in rounds of price reviews, a second industry source with knowledge of the matter told Reuters.
Ashgabat wanted to be paid "in line with global pricing practices", a Turkmenistan official familiar with the talks said.
Sources and officials declined to be named as they are not authorised to speak with media.
RUSSIA OVERTURES
Still, the price negotiations are likely to be complex as China has multiple supply options that also include domestic production and new long-term LNG contracts with Qatar and the United States, said Jason Feer, Houston-based head of business intelligence at consultancy Poten & Partners.
"The prices need to be high enough to justify the expense of building an expensive pipeline but low enough to be competitive," said Feer.
Moscow's recent overtures to fast-track the shorter Power of Siberia 2 connection, via Mongolia, and a more recent proposal by Almaty to supply China via Khazakhstan offered CNPC leverage in finalising the Turkmen link, said the CNPC official and the second industry source.
"CNPC could use the Russian proposals to bargain for a better price for Line D while taking its time to discuss new Russian supplies," said the second source.
Factbox: China's main import gas pipelines
China, the world's third-largest gas buyer, imports the fuel in gaseous form via long-distance pipelines from three sources - central Asia, predominantly Turkmenistan, as well as Russia and Myanmar.
Its pipeline gas volumes totalled 45.8 million tonnes in 2022, meeting 17% of China's gas demand.
China separately imported 63.4 million tonnes of tanker shipped liquefied natural gas (LNG) last year, with total LNG imports meeting 41% of Chinese demand.
The remainder of China's gas was sourced domestically.
CENTRAL ASIA
China has since 2008 laid three trunklines at an estimated combined cost of more than $14 billion, connecting gas fields in Turkmenistan to the border with China's northwestern Xinjiang region.
Lines A and B start at the border of Turkmenistan and Uzbekistan, crossing Kazakhstan before entering China at border town Khorgos. Each spans 1,833-kilometers (1138.97 miles) and together they are able to transport 30 billion cubic meters (bcm) of gas a year.
Line C, parallel to A and B, started pumping gas to China in 2014 with designed annual capacity of 25 bcm, though the line has been operating under capacity as domestic pipeline infrastructure lags.
A senior CNPC executive told Chinese media in 2017 that China should have recouped the investment of the three lines within 7.5 years if operating at full throttle.
LINE D
The newest, Line D, starts at Turkmenistan's giant Galkynysh field, one of the largest gas fields in the world with reserves exceeding 21 trillion cubic meters.
The line, which would be the first to also cross Uzbekistan and Kyrgyzstan and Tajikistan, would be 966 km long with annual carrying capacity of 30 bcm. Countries signed preliminary agreements with China in 2013/14.
In September 2014, Chinese President Xi Jinping attended a ceremony in Dushanbe, capital of Tajikistan, marking the start of construction of the D line, state media People's Daily reported then.
The project, however, has been slow in coming due to the complex price negotiations between China and Turkmenistan, technical challenges developing Galkynysh field and difficulties laying the pipelines through the mountainous terrains.
POWER OF SIBERIA 1
Russian gas giant Gazprom began delivering gas to China in late 2019 via the 3,000-km Power of Siberia project linking Siberian fields with northeast China. Supplies reached 16 bcm last year with plans to ramp up to reach 38 bcm by 2025.
The pipeline is part of a 30-year, $400 billion deal signed in 2014, a landmark agreement that marked Moscow's diversifying exports away from its top client Europe.
FAR EAST SAKHALIN PROJECT
In February of 2022 during Russian President Vladimir Putin's visit in Beijing, China agreed to import gas from Russia's Far East island of Sakhalin, via a new pipeline across the Japan Sea to northeast China, with deliveries reaching up to 10 bcm a year around 2026.
POWER OF SIBERIA 2
To compensate for the now-defunct Nord Stream 1 pipeline linking Russia
with Germany, Putin began last September to revive Power of Siberia 2, which was
first proposed years ago.
The proposed 2,600-km pipeline would bring 50 bcm gas from the huge Yamal peninsula reserves in west Siberia. Gazprom began a feasibility study on the project in 2020 and Russia's Deputy Prime Minister Alexander Novak said in late March Moscow was aiming for agreeing contracts this year.
MYANMAR-YUNNAN PROJECT
The 793-km Myanmar-China Gas Pipeline, linking Ramree Island on the western coast of Myanmar with Chinese border city Ruili of southwestern Yunnan Province, began operating in 2013. It's designed to carry 12 bcm a year.
About 20% of the gas supplies are reserved for local Myanmar market.
But due to low productions from offshore Myanmar gas fields, the pipeline has for years been running under capacity, with 2022 deliveries to China at 3.8 bcm according to Chinese customs.
The proposed 2,600-km pipeline would bring 50 bcm gas from the huge Yamal peninsula reserves in west Siberia. Gazprom began a feasibility study on the project in 2020 and Russia's Deputy Prime Minister Alexander Novak said in late March Moscow was aiming for agreeing contracts this year.
MYANMAR-YUNNAN PROJECT
The 793-km Myanmar-China Gas Pipeline, linking Ramree Island on the western coast of Myanmar with Chinese border city Ruili of southwestern Yunnan Province, began operating in 2013. It's designed to carry 12 bcm a year.
About 20% of the gas supplies are reserved for local Myanmar market.
But due to low productions from offshore Myanmar gas fields, the pipeline has for years been running under capacity, with 2022 deliveries to China at 3.8 bcm according to Chinese customs.
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From: eugene
simonov
Sent: Saturday, May 27, 2023 10:07 AM
Subject: Fwd: [China-Global-Info] China prioritising Turkmenistan
over Russia in next big pipeline project
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