China, Turkmenistan: Natural Gas and Regional Geopolitics

3 MINS READJan 22, 2008 | 20:14 GMT
A deputy manager of PetroChina Co.'s pipeline and natural gas unit recently confirmed that China and Turkmenistan finally have agreed on a price for Turkmen natural gas imported via the planned Central Asia Gas Pipeline, China Securities Journal reported Jan. 21. The price was the last sticking point to a deal under which PetroChina can tap Turkmen energy resources, coming six months after China National Petroleum Corp. (CNPC) committed to buying 30 billion cubic meters of natural gas per year for 30 years from Turkmenistan. With the agreement, China has moved one more step along its bid for Central Asia's energy resources — and ultimately toward expanding its geopolitical influence over the wider region. China is in the process of drawing a knife across the map of Central Asia, slicing off the southern four republics from their traditional overlord, Russia, by running a pipeline to Turkmenistan. Turkmenistan makes up for the bulk of Central Asia's natural gas exports, so by securing access to Turkmen natural gas, Beijing is crippling Moscow's ability to provide for Russia and Europe's natural gas needs. China thus also is hampering Moscow's ability to wield an energy stick over Europe. The Chinese pipeline will shrink Moscow's income by approximately $9 billion annually, based on 30 billion cubic meters of natural gas sold at the current Russian price for Europe of $300 per 1,000 cubic meters. By refusing a Russian offer to allow China to import Siberian natural gas from Moscow at $195 per 1,000 cubic meters, or half the price China will be paying Turkmenistan, Beijing is indicating that more than just business might be driving its energy decisions. China sees Turkmenistan as a more politically reliable supplier than Russia, which has a well-known tendency to use energy as leverage for geopolitical concessions. Furthermore, pre-existing infrastructure in Turkmenistan means the Turkmen deal could prove cheaper than the Russian deal, even if Turkmen natural gas is more expensive. And finally, China wants access to Central Asia's energy, and Turkmenistan is a critical piece of the pie. Derailing the project now will be hard unless Russia manages rapidly to come up with more money and political security for Turkmenistan than China is offering. A 7,000-kilometer (about 4,300 miles) natural gas pipeline to China already is under construction and is set for completion in 2009. It will transport natural gas from eastern Turkmenistan, where CNPC recently purchased extraction rights to estimated reserves of 1.3 trillion cubic meters, to western China. But the game is not over, despite China's good start. The country to watch next is Kazakhstan, where Beijing is about to complete a new oil pipeline to China. If Beijing also manages to secure a Kazakh natural gas pipeline, in addition to contracts for filling the pipeline, then China will have gained control over much of Kazakhstan's — and Central Asia's — resources, too.

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