One of the most talked about news in Kazakhstan’s oil and gas industry today is that Caspian gas, in particular, from Azerbaijan may turn 180 degrees around and flow east instead of west, toward China. This unexpected idea originated in Kazakhstan. The president of the national oil and gas company KazMunaiGas (KMG), Kairgeldy Kabyldin, has proposed to his counterpart, the head of state oil company of Azerbaijan SOCAR, Rovnag Abdullayev, to send Azerbaijani gas to a Chinese pipeline that will run through Kazakhstan.
Kabyldin told New Europe in an interview that he was the initiator of the proposed idea. “It is fact that all Caspian resources – oil and gas – are currently west-oriented. And if today some suggest that we connect through the Caspian Sea from east to west, why can’t we do it from west to east?” he asked, responding to a question as to how the gas from Azerbaijan will get to Kazakhstan. The presidents of the 2 state companies talked about the positions of their countries at the IV Eurasian Energy Forum.
As far as its further transportation overland is concerned, KazMunaiGas is now creating a system, Kazakhstan-China, that will include the oil pipeline Atasu-Alashankou and a gas pipeline referred to in the official papers as Asian. The first gas is expected to fill this pipeline as soon as December this year. At this stage, it will carry Turkmen gas, which will transit through Uzbekistan and Kazakhstan towards China.
In addition, Kazakhstan is planning to start the construction of another, so-called “internal” gas pipeline this year, Beineu–Bozoi–Shymkent. It will carry gas from Kazakhstan’s oil fields in the west of the republic to southern regions that still depend on gas supplies from Uzbekistan. The pipeline will not be completed until 2011.
However, by synchronizing the Asian gas pipeline with Beineu–Bozoi–Shymkent, it is quite possible that it could be used to deliver Kazakhstan gas to China as well.
It is worth noting that these 2 gas projects are joint ventures between KazMuniGas and CNPC. It is the Chinese partner that finances these projects. “Thus, taking shape is a whole new gas infrastructure “West-East” capable of moving the flows of gas towards China. This is why we have suggested to the gas-rich Azerbaijan to consider our proposal to diversify the supplies,” the KMG president concluded.
He added that the proposed idea is a project of the future, when the status of the Caspian Sea is finally decided. “There are no parochial interests here, just for the purposes of diversification of supplies of gas producing countries,” Kabyldin said. Kazakhstan may come forward with any proposal it likes, but the key is whether Azerbaijan will want to send its gas to China rather than Europe - if the money is right.
Asked how it could be technically possible to bring gas from Baku to Aktau by sea, he said: “Nothing is impossible as long as there is a market and a good delivery infrastructure. Azerbaijan already has about 5,000 kilometres of submerged gas pipelines in the Caspian Sea.”
Analysts believe that Azerbaijan’s decision will depend in this case on 2 sides: Kazakhstan and China. For Azerbaijan to be interested in supplying its gas to the east, China should provide commercial proposals, and Kazakhstan – transit tariffs. According to the analysts, it should not take Kazakhstan and Azerbaijan more that half a year to lay a submerged gas pipeline between their zones of the Caspian shelf.
Given that China and India are fast-growing energy markets and willing to pay top dollar for oil and gas supplies, the head of an oil-producing company told New Europe that for the crude in the Chinese oil pipeline “they give a very good price, higher than in the CPC system”.
It is quite possible that a price offer from the Chinese may interest SOCAR, which is currently promising its gas to a different project, the EU-sponsored Nabucco. However, according to some analysts, the European countries are rather talking about the project than taking concrete actions. “Another summit will be held in Bucharest, without the participation of Kazakhstan, Turkmenistan, or Georgia. However, representatives from 40 European countries will be discussing, yet again, a gas pipe that does not exist yet. Huge money has been spent and will continue to be spent on these forums and discussions, and these speculations will go on an on, while the gas pipeline to China will already be operational in December,” the US Bureau Chief of Business People magazine, Yuri Sigov, who specializes in the countries of the Caspian Region, told New Europe.