Does China Need Turkmen Gas?

Beijing’s recent agreement with Ashgabat to extend a gas pipeline from Turkmenistan all the way to China territory is based more on the possible geopolitical advantage it may gain than on expectations of economic dividends, NBCentralAsia analysts say.



A delegation led by China’s first deputy trade minister visited Turkmenistan in late August to firm up agreements inked in April when President Saparmurat Niazov was in Beijing.



The two sides have made no secret of the fact that energy resources are the main topic of bilateral relations, specifically a deal according to which Turkmenistan will supply China with 30 million cubic metres of gas annually for 30 years from 2009. The pipeline will run approximately 7,000 kilometres from eastern Turkmenistan to China’s Pacific coast. The project cost will run to 10 billion US dollars.



The exact route has not yet been mapped out. It might bypass Uzbekistan and just go through Kazakstan, but this would significantly extend the length of the pipeline, making it more expensive.



Analysts say both countries are extremely interested in a speedy start to the project. China currently relies mainly on coal for its energy needs, and is now trying increase its consumption of oil and gas. But since 90 per cent of China’s energy imports come from the Middle East, it now faces the need to diversify its suppliers.



For Turkmenistan, the pipeline would open up China’s massive markets and end Ashgabat’s dependence on Russian pipelines owned by Gazprom.



However, questions remain as to the economic viability of the project. Experts point out that no one has exact information about the size of Turkmenistan’s gas reserves. Some maintain that the country does not have the capacity to supply China with the kind of volumes that are being talked about, given plans to build a pipeline to Pakistan and India, as well as a likely increase in Turkmen gas exports to Russia.



In addition, the country’s gas extraction infrastructure is deteriorating, and will need major foreign investment to maintain it. An increase in gas production will require additional capital investment.



For China, the political and geopolitical aspects of the deal may outweigh the economic benefits. The gas pipeline, like other energy projects involving China, will strengthen Beijing’s influence in Central Asia. This may make up for the high cost of the project.



The financing of the gas pipeline is still in question. Niyazov is hoping China will take on the lion’s share of the cost. Analysts predict that China will make significant concessions to get the project under way.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)