Eurasia Capital, a pan-regional investment bank produced this research note on the launch of the Central Asia-China gas pipeline as China strengthens its energy ties with Central Asia countries. You can access the full report at www.eurasiac.com
Alisher Ali Djumanov, CEO of Eurasia Capital discussed the opening of the Central Asia China gas pipeline and its implications with Bloomberg’s Bernard Lo in Beijing on December 16. The video of interview is available at www.eurasiac.com
Eurasia Capital: China strengthens its energy ties with Central Asia: Key Gas Pipeline Launched
China launches natural gas pipeline with Central Asia. China’s President Hu Jintao inaugurated the opening of the Central Asia China gas pipeline during his visit to Turkmenistan on December 14, 2009. Presidents of Kazakhstan, Uzbekistan and Turkmenistan joined Chinese counterpart at the Turkmen-Uzbek border in the ceremony marking the launch of the 1,833-km pipeline that passes through their countries to connect to the Xinjiang province of China. Built in a record time, the US$7.3bn pipeline is strategically important for the supplier and transit Central Asian nations on the one hand, and China, whose demand for energy is growing, on the other. In particular, this pipeline is a real triumph for Turkmenistan as the holder of the world’s 4th largest gas reserves has had its gas exports highly dependent on Russia’s Gazprom since 1991.
End of Gazprom Monopoly. The opening of this pipeline effectively ends near monopoly of Gazprom for Turkmen gas exports. Now China has achieved what the European Union (through their backed projects like Nabucco) is trying for years: access to Central Asia gas bypassing Russia.
Will Azerbaijan be the next supplier? Recently senior executives of the State Oil Company of Azerbaijan (SOCAR) stated that Azerbaijan will consider exporting its gas to China. With lack of progress with Nabucco, Azerbaijan may indeed view gas exports to China as viable alternative.
Kazakhstan-China oil pipeline. China’s strategic move towards securing energy supplies from Central Asia began with the launch of a pipeline to import oil from Kazakhstan that holds 3.2% of the world’s oil reserves. The US$3bn Kazakhstan-China oil pipeline is China’s first international oil pipeline and Kazakhstan’s first major export pipeline that bypasses Russia running from Kazakhstan’s Caspian shore to Xinjiang in China.
China provides loans in exchange for energy. China is well positioned to capitalize on opportunities that emerged aftermath the global economic crisis which hit hard Central Asian countries. China pledged multi-billion dollar loans to Central Asian states in order to assist their economic recovery. Such extensive financial support allows China to build close ties with Central Asia and to gain access to energy resources.
Chinese NOCs major players in Kazakhstan. Chinese national oil companies (NOCs) made a number of acquisitions of oil and gas companies and assets in Kazakhstan. Since 2005, CNPC, Sinopec, CITIC Resources spent US$9bn on acquisitions in the oil sector which made them the second largest oil producer in Kazakhstan.
In our view, the launch of the Central Asia-China pipeline is positive for Central Asian states as they are able to diversify their gas export routes. The new alternative will ensure increasing and sustainable market for the region’s energy resources in fast-growing China. We also believe the new export pipeline is positive for independent gas exploration and production companies operating in Central Asia, including Toronto-listed Tethys Petroleum Limited (TPL:TO). These companies should become attractive targets for Chinese companies and investors.
About Eurasia Capital:
is a Hong Kong-based pan-regional investment bank with focus on Mongolia, China, Russia and Central Asia. The Firm offers cross border M&A and advisory, sales & trading and research services to its international and regional clients including government agencies, major energy and resource companies, sovereign wealth funds, private equity groups and global portfolio investors. www.eurasiac.com
Person responsible for this info:
Associate, Sale & Trading Department
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