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Caspian oil exports heading
east
By Alexander Sukhanov
ASTANA - Construction of the
Kazakhstan-China pipeline is set to start in
March, ushering in an ambitious project that not
only will provide a new source of hydrocarbons to
the growing Chinese economy, but also will change
the oil balance in the region.
The idea of
building a direct pipeline route from Kazakhstan
to western China had been under discussion for
some time. An agreement, reached at the highest
political level between China and Kazakhstan, was
finally achieved in 1997. But since that time
concrete details of the project have caused many
disagreements, and for this reason it did not
appear in the Asian oil arena. However, now the
Kazakhstan-China pipeline is about to become a
reality that other energy players must consider.
The
pipeline will extend 988 kilometers from
the Kazakhstan oil terminal in Atasu to the Chinese
railway station in Alashankou. Its carrying
capacity will be 10 million tons a year at
the first stage, then will increase up to 20 million
tons at the second stage and could even reach
up to 50 million tons in the long term.
Construction should be completed at the end of
this year, and Kazakhstan hopes to begin the first
deliveries of oil in 2008.
Kazakhstan has
long been interested in the pipeline, which will
become its first export route passing through
Russian territory. Besides giving it export
independence, the pipeline will provide Kazakhstan
with about US$700 million in investments. China
has activated the project because its fast-growing
economy has begun to feel the sharp deficit of
energy resources. According to forecasts, by 2020
the country's demand for oil could reach 400
million tons annually. At present, China imports
80 million tons of crude oil a year. Of course,
the new supply of oil from Kazakhstan cannot fully
satisfy the huge Chinese economy. But the new
pipeline can promote the goal of changing the oil
balance in the region.
The main question
now is where the oil for the pipeline will come
from. This responsibility has been assigned to the
Chinese National Petroleum Corp (CNPC),
which is already conducting negotiations.
Supposedly, the basic source of oil will be the
deposits of the Kumkol group (which are developed
by Hurricane-affiliated PetroKazakhstan company),
in the southwest of Kazakhstan. Aside from this,
Kazakhstan has already made an offer to Russia to
transport through the new pipeline its Siberian
oil. Such an offer is possible, technically, as
the Kazakh oil terminal at Atasu incorporates the
Omsk-Charjou pipeline going from western Siberia
through Kazakhstan to Turkmenistan.
However, such a variant looks not
absolutely convincing. By calculations, the
Kazakhstan-China pipeline will be profitable only
if it transports no less than 20 million tons of
oil a year. About 10 million tons a year, with the
prospect of growth up to 12 million to 15 million
tons, are to be extracted on Kumkol group
deposits, thus their export potential now does not
exceed 7 million tons. As for Russia, it has not
yet given its consent to participate in using the
pipeline.
Therefore, according to expert
opinions, the main stake will actually come from
the giant Kashagan deposit on the Caspian shelf.
Kashagan is the largest oilfield discovered in the
world in the past 20 years. Industrial oil
extraction there should begin in 2009 and by 2010
it could reach 22.5 million tons. Realization of
the Kashagan project is conducted with an
international consortium that includes ExxonMobil,
British Gas, ConocoPhillips, Royal Dutch/Shell,
Total and Inpex. CNPC already tried to join the
project by buying British Gas' share (16.67%). But
it has failed to get the consent of the consortium
participants. Now the Kazakh government has plans
to make a similar deal. It has already reached an
agreement with British Gas and the international
consortium, now it is necessary to define only the
size of British Gas's share to sell. Experts
explain the coincidence of interests of China and
Kazakhstan to a share in the Kashagan project with
another common interest in the Atasu-Alashankou
pipeline.
Meanwhile, the transportation of
Kashagan oil to China could affect the work of
another export route - the Caspian Pipeline
Consortium (CPC). This pipeline, from the Caspian
Sea to a Russian port on the Black Sea, already
has a problem with insufficient loading. Despite
this, CPC owners have made the decision to expand
the pipeline's capacities from 28 million tons a
year up to 67 million tons based on expectations
on Kashagan oil.
Another route that could
suffer is the Baku-Tbilisi-Ceyhan (BTC) pipeline,
with a carrying capacity of about 50 million tons
a year. It will connect oil-rich Azerbaijan with
the Ceyhan Turkish port on the Mediterranean Sea
and will begin operating in the near future. The
BTC pipeline will be economically effective for
the transportation of not only Azerbaijan, but
also Kazakh oil, which is supposed to be delivered
to the Azerbaijani capital Baku in tankers moving
through the Caspian Sea. BTC shareholders have
decided to increase capacity of the pipeline also
based on expectations from the same Kashagan
oilfield. But instead of this, they can lose a
part of the Azerbaijan oil. Instead of using the
BTC pipeline to transport oil, the Chinese
companies participating in five
hydrocarbon-producing projects in Azerbaijan can
use the Kazakhstan-China pipeline. And in this
case, oil will be carried in the opposite
direction, from Baku to Kazakhstan with tankers,
or by pipeline through the Caspian Sea (the idea
of this pipe is already being discussed).
Thus the Atasu-Alashankou pipeline can
change a strategic route of the Caspian oil
export, redirecting it from the west to the east.
That may seem improbable, but then nobody paid
much attention to the Kazakhstan-China pipeline,
nor to the strengthening of the Chinese presence
in the Caspian Sea in general.
(Copyright
2005 Asia Times Online Ltd. All rights reserved.
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