Firms discuss cross-border gas pipeline
By Xie Ye (China Daily)
Updated: 2004-08-25 08:51

China and Kazakhstan are reviewing the possibility of building a pipeline to deliver natural gas from western Kazakhstan to Xinjiang Uygur Autonomous Region, on China's western border, to satisfy the country's increasing gas demands.

The cross-border pipeline will connect to China's west-east pipeline, which will transport 12 billion cubic metres of natural gas from Tarim Basin in Xinjiang to Shanghai, some 4,000 kilometres away.

The Sino-Kazakhstan pipeline will allow China to secure gas fields in western Kazakhstan as back-up resources to China's west-east pipeline.

PetroChina, the nation's largest oil and gas company, is set to start the commercial operation of the west-east project by the end of this year. But the company has not secured enough reserves to satisfy demand for 45 years - the designated tenure of the project.

Insiders said to pipeline natural gas from Central Asian countries such as Kazakhstan and Turkmenistan is an important step in meeting the long-term gas demands of the west-east pipeline project, should the Chinese company not be able to find more resources in coming years.

The Sino-Kazakhstan gas pipeline project will cost billions of US dollars and may supply several billion cubic metres of gas, said sources close to the project.

In the long term, the pipeline may extend further west towards Uzbekistan and Turkmenistan, and may be connected with the pipeline grids of Russia and Iran, creating a "Pan-Asian Global Energy Bridge".

Insiders said, however, that the project is still premature, and it may take years to scrutinize its feasibility.

The project has made little, if any, progress, after it was put forward several years ago. Experts are concerned that it is too expensive to pipe gas thousands of miles to Chinese markets.

The proposal returned to the limelight last June when China and Kazakhstan signed agreements to expedite the appraisal of the project during Chinese President Hu Jintao's visit to Kazakhstan.

A senior engineer with the exploration and development wing of China National Petroleum Corp parent of PetroChina said the two countries are still in the initial stages of a feasibility study on upstream resources and market demands.

"There are several potential routes and supplying gasfields in discussion," said the engineer who declined to be identified. "The project is premature."

Basically, the project will be formed in two sections: the first one from western Kazakhstan to the western border of Xinjiang, and a second one in Chinese territory to link with the west-east pipeline, according to the engineer.

Still, many daunting challenges have to be resolved, including how to finance the huge investment, how to make gas prices reasonable and whether the reserves are large enough to sustain the project, said the engineer.

The political struggles among countries such as the United States and Russia to control reserves in Caspian areas - the second largest potential oil and gas reserve after the Gulf region - may also cause some problems to the project.

A veteran senior official with PetroChina said the project is less likely to make a breakthrough in coming years. Rather, it will be considered a strategic back-up in the long-term.

"Compared with pipeline gas, coastal areas prefer liquefied natural gas which requires less technology and is easier to transport," said the official.

The Sino-Kazakhstan gas project is part of the Chinese Government's drive to triple natural gas consumption by 2010. The government hopes to replace some oil and coal consumption with gas to reduce its heavy reliance on oil imports, and improve the environment by burning less coal.

But China has not yet discovered sufficient gas reserves.

The country is estimated to fall short of natural gas needs by 80 billion cubic metres by 2020.

To meet the demand, China is considering buying pipeline gas from neighboring countries and regions such as Russia and Central Asia and importing liquefied natural gas in coastal areas.

China is mulling over another cross-border pipeline project which aims to build a 4,900-kilometre pipeline to carry 30 billion cubic metres of natural gas annually from the Kovykta gas field in East Siberia to China's northeastern provinces and South Korea for 30 years.

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