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Central Asia

CENTRAL Asia is benefiting from the angst gripping energy consumers worldwide. Central Asian gas, regarded as too difficult to produce by all except Russia at the start of the decade, is now viewed as a desirable resource.

CENTRAL Asia is benefiting from the angst gripping energy consumers worldwide. Central Asian gas, regarded as too difficult to produce by all except Russia at the start of the decade, is now viewed as a desirable resource. Rich uranium mines in Kazakhstan and Uzbekistan have caught the attention of countries turning to nuclear-power generation as an alternative to oil and gas.

In the 1990s, Western and Russian oil investors were the principal investors in the region. Now, Asian – particularly Chinese – companies are playing a much more prominent role. State-owned companies from South Korea, India and China are negotiating for blocks in the Caspian Sea offshore Kazakhstan – by far the most sought after oil play in Central Asia. Kazakhstan's offshore sector is expected to produce over 2.5m b/d by 2015, providing a significant counterweight to Opec.

Western majors are wary that new players from the east may be financially and culturally better equipped to win deals in Central Asia. Private shareholders are far more likely to raise questions about the extremely high costs associated with tapping Caspian Sea oil, as well as environmental risks and the human-rights records of countries such as Uzbekistan and Turkmenistan.

State-owned companies with a strategic need to gain access to oil – as opposed to a financial need – tend to be more willing than Western majors to invest up front in big infrastructure projects. China's CNPC agreed to foot the entire $0.78bn bill for an oil pipeline from central Kazakhstan to its northwestern frontier, which started up this summer. Chinese buyers are now negotiating gas-import contracts with Kazakhstan and Turkmenistan and are expected to offer to fund construction of a pipeline to carry large volumes of Central Asian gas east.

Pipelines are trump cards in the geopolitical battle to gain access to resources in landlocked Central Asia. Russia's stranglehold on exports from the region was broken when the Kazakhstan-China oil pipeline opened this summer. Kazakhstan and Azerbaijan have since signed a treaty providing political support for the transport of Kazakhstani crude through the Baku-Tbilisi-Ceyhan pipeline to the Turkish Mediterranean. The US, meanwhile, is encouraging the revival of a project to bring Central Asian gas across the Caspian to Europe, breaking Russia's monopoly over gas flows out of the region.

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