Posted on June 25, 2009 - by Venik

China signs deal for 30 years of Turkmen gas

Turkmenistan agreement weakens Russia’s hold on central Asian resources

China today signed a 30-year agreement to buy natural gas from Turkmenistan, in a major deal that challenges Russia’s historic hegemony over energy supplies from central Asia.

Turkmenistan said it would increase the amount of gas it sells to Beijing annually by 30%, or 40bn cubic metres, state newspapers reported. Work on a 4,000-mile pipeline between Turkmenistan and China is likely to be completed this year, they added.

The deal is a blow to Russia, which has previously been the main buyer of Turkmen gas. Moscow appears to be losing a quiet but increasingly intense battle with China for central Asia’s vast energy reserves, which include oil from Kazakh­stan and gas from Turkmenistan.

After a long period of mutual animosity during the cold war, relations between Moscow and Beijing have improved dramatically, symbolised by a visit from China’s president Hu Jintao to Russia last week. Hu got a warm reception from president Dmitry Medvedev and prime minister Vladimir Putin.

Under the surface, though, strategic rivalry appears to be growing. The rise of China and its economy threatens Russia on several fronts, including increasing marginalisation from international decision-making, said Dr Bobo Lo, of the Centre for European Reform.

The new pipeline will cross Uzbekistan and Kazakhstan. “This agreement is very important for ensuring a stable, long-term and adequate supply of gas for this pipeline,” said China’s vice-premier, Li Keqiang, after signing the new deal with Turkmen president Gurbanguly Berdimuhamedov.

The precise sum paid by China is unclear. But according to reports Beijing has promised to lend $3bn (£1.8bn) to develop the huge South Yolotan natural gas field close to the border with Afghanistan, which British experts say is one of the five biggest in the world.

The deal also suggests that Russia has badly miscalculated in its recent dealings with Turkmenistan, central Asia’s most secretive, repressive and eccentric nation. Russia reduced its gas imports from Turkmenistan this year because of falling prices and demand from Europe.

In April a gas pipeline between Turkmenistan and Russia mysteriously exploded, leading each side to blame the other. Russia passes on most Turkmen gas it imports to Ukraine and Europe. The pipeline has been repaired but Moscow’s relationship with Turkmenistan remains frayed.

The European Union has also been interested in Turkmen gas for its planned Nabucco pipeline, which is supposed to transport natural gas from the Caspian to Europe via Turkey, bypassing Russia. According to the Russian business daily Kommersant, however, negotiations with the Turkmens have failed up to now because of the EU’s insistence on transparent budgets.

This week the US’s special envoy for Eurasian energy, Richard Morningstar, suggested that Russia’s main competitor for Turkmenistan’s massive gas resources was not Europe but China. “Russia shouldn’t be afraid of America’s support for Nabucco but of Chinese projects in Turkmenistan,” he pointed out.

Li also signed a deal for state-owned China National Petroleum Corporation to take gas from the Bagtyyarlyk field near Turkmenistan’s border with Uzbekistan. The Turkmen government believes the field holds up to 1.3tn cubic meters of gas. CNPC was awarded the licence to explore and develop the field in 2007.

Turkmenistan has long exported nearly all its gas to Russia, with the exception of a small amount sent to Iran. Some international experts have voiced doubt that Turkmenistan could meet all its obligations, but the government insists there is enough gas to supply all buyers, the Associated Press reported.

Turkmenistan estimates its total reserves at more than 20tn cubic meters, but international experts have questioned that figure.

Original article

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