China to Import Natural Gas from Uzbekistan, Challenges Pipeline Construction

Strategic Insights -

China will start importing natural gas from Uzbekistan in 2011 as part of its efforts to diversify its energy sources and pressure Russia's Gazprom. Uzbekistan, the second-largest natural gas producer in Central Asia, hopes to offset declining revenue from gas exports due to falling demand during the crisis by selling gas to China. The Central Asia-China gas pipeline, which was commissioned in December 2009, will deliver natural gas from Turkmenistan and, starting in 2011, from Uzbekistan as well.

Key Takeaways:

  • The Central Asia-China gas pipeline, with a total length of approximately 7,000 kilometers, was commissioned in December 2009 and has a capacity of up to 40 billion cubic meters (bcm) of gas per year.
  • Uzbekistan will export up to 10 billion cubic meters (bcm) of natural gas to China per year, using the second branch of the pipeline, which has been modified to go through the town of Gazley, where Uzbekistan's largest underground gas storage facility is located.
  • China's CNPC will complete exploration in the Ustyurt and Bukhara-Khiva regions in early 2011, having spent about $280 million to explore five investment blocks, but found only one field with small reserves.
  • Lukoil, a Russian company, plans to deliver about 10 billion cubic meters of gas per year from Uzbekistan to China, but has not started construction of the Kandym Gas Processing Plant, which was supposed to process up to 8 bcm of gas starting in 2011.
  • Experts believe that Uzbekistan's export of natural gas to China will face challenges, including the problem of filling the pipeline with Uzbek gas, which may be difficult to achieve due to the country's plans to limit domestic consumption in order to increase exports.
  • ATG, the joint venture between Uzbekneftegaz and CNPC, will operate the Uzbek section of the pipeline, worth approximately $3 billion.

Statistics:

  • The Central Asia-China gas pipeline has a total length of approximately 7,000 kilometers, with 188 kilometers passing through Turkmenistan, 525 kilometers through Uzbekistan, 1,293 kilometers through Kazakhstan, and more than 4,860 kilometers through China.
  • The pipeline has a capacity of up to 40 bcm of gas per year, with the majority (30 bcm) initially planned to be Turkmen gas.
  • Uzbekistan plans to export up to 10 bcm of natural gas to China per year.
  • The country hopes to offset declining revenue from gas exports due to falling demand during the crisis by selling gas to China.
  • The second branch of the pipeline route was changed to go through Gazley, where Uzbekistan's largest underground gas storage facility is located.

Sources:

  • "China to import gas from Uzbekistan" by Dilshod Ashurmatov, January 13, 2011, The Central Asian News Agency (TCA).
  • "Uzbekistan plans to export up to 10 bcm of natural gas to China" by Dilshod Ashurmatov, January 13, 2011, The Central Asian News Agency (TCA).