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Unlocking the gas trap

WITH the exception of Turkmenistan, which was a gas producer in the Soviet era, Central Asian producers have tended to flare output surplus to domestic needs or leave it in the ground. But intensifying international competition for energy resources is unlocking the Central Asian gas trap, writes Isabel Gorst.

China is negotiating to import up to 50bn cubic metres a year (cm/y) of Central Asian gas. Russia plans to boost imports from the region to above 100bn cm/y, to offset a slow-down at its giant western Siberian fields. Europe, concerned about over reliance on Russian gas, is promoting pipeline projects to bring Central Asian gas west and India is encouraging the revival of a project to build a pipeline to carry Central Asian gas south across Afghanistan.

China has the option of importing gas from Sakhalin, from western Siberia and from a host of liquefied natural gas suppliers. But it has already agreed to buy gas from both Turkmenistan and Kazakhstan, and is seeking upstream opportunities in both republics. In Uzbekistan, China National Petroleum Corporation recently joined a consortium exploring in the Aral Sea, which is believed to be gas prone.

China has already invested over $0.75bn constructing an oil pipeline from central Kazakhstan to its northwestern frontier. Kairgeldy Kabyldin, head of transport at KazMunaiGaz, the state-owned oil company, has said a gas pipeline running parallel to the new oil line to China will be completed by 2009. Initial exports of 10bn cm/y will triple by 2012, he claims.

In April, meanwhile, Turkmenistan agreed to supply China with up to 30bn cm/y of natural gas from 2010. And Chinese companies have been invited to explore fields on the right bank of the river Amu Darya, which may provide a new source of gas for export. Gas production from existing developments has been committed to Russia, which wants to increase imports from the republic to 80bn cm/y within five years, and Iran, which is linked to Turkmenistan by a small pipeline.

However, Turkmenistan is an unreliable trading partner. The republic has threatened to cut off deliveries to Russia several times during price disputes. Demonstrating its dependence on Turkmenistani gas, Russia has agreed to three gas-price increases this year already (see p37).

Russia's strategy is to diversify its Central Asian gas imports. Supply from Uzbekistan is expected to rise to 12.6bn cm this year, from 11.5bn cm in 2005. Lukoil is investing $2bn in a gas project in the country, with output to be sold to Gazprom. In Kazakhstan, Russia has entered a joint venture to import the bulk of gas production from Karachaganak for processing at Orenburg.

The US wants to break Russia's control over the Central Asian gas industry. US diplomats have welcomed plans for exports to China. And the US and the European Union are promoting a project to build a gas export line from northern Kazakhstan across the Caspian to Baku, Azerbaijan. At Baku, Kazakhstani gas would enter the South Caucasus Gas Pipeline to Erzurum in eastern Turkey, which is nearing completion.

Kabyldin says various routes for the trans-Caspian gas pipeline are under consideration, including one from Kazakhstan's Aktau port to Baku and another running south to collect gas in Turkmenistan before crossing the Caspian. However, Western oil companies operating in the Caspian area have doubts about the economic or political viability of a trans-Caspian gas-export system.

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