For its contribution to the Kazakh economy, China may
yet land the most coveted prize: approval for state-owned
China National Petroleum Corporation (CNPC) to buy into
the giant northwestern Karachaganak gas condensate field to
add to its 8.33% stake in the Kashagan oilfield.
Karachaganak is controlled by Karachaganak Petroleum
Operating (KPO) according to UK’s BG Group, which owns a
29.25% stake in the company. KPO’s other shareholders are
Italy’s ENI (29.25%), US major Chevron (18%), Russia’s LukOil
(13.5%) and Kazakhstan’s state-owned KazMunaiGas (10%).
Karachaganak accounts for around 45% of the country’s
total gas production and approximately 16% of total liquids
production. It holds around 9 billion bbls of condensate and
48 trillion ft
3
of of gas, according to BG.
In September 2013, CNPC paid US$5 billion for a stake in
the Kashagan oil project in the Caspian Sea.
World Bank comments on Azerbaijan and
Uzbekistan
Azerbaijan’s growth accelerated to 5.7% in 1H15, driven by
public investment and a boom in the agricultural and non-oil
manufacturing sectors. However, these gains were offset
by the decline in oil export earnings, causing the current-
account surplus to fall sharply and pushing the budget
balance into deficit. The Azerbaijani manat has stabilised
against the US dollar following a 34% plunge in value in
February 2015 that has stoked inflationary forces.
The bank expects Azerbaijan’s economy to grow at an
average annual rate of 2.4% between 2015 and 2017. Declining
oil production and export revenues will reduce the country’s
current account surplus to 5.2% of GDP. Russia’s economic
slowdown will remain a downside risk as it accounts for
one-third of Azerbaijan’s non-oil exports.
The bank expects investment in the hydrocarbons sector
to significantly increase in 2016 - 2017 with the construction
of major gas pipelines.
After growing by 8.1% in 2014, the Uzbek economy
will expand at a slower rate of 7% in 2015. Growth will be
dragged down by weaker external conditions including
further declining world prices of key commodities and
Uzbekistan’s reliance on the economies of Russia and China.
While the government will continue to boost spending
and lending to bolster economic growth, returning migrants
will create pressures for new jobs. Workers’ remittances, which
accounted for about 9% of GDP in 2014, plunged by 48% in 1H15.
The economy has also been hurt by the fall in prices
of Uzbekistan’s key export commodities, natural gas,
copper, cotton, and gold. As a result, its export earnings are
expected to fall by 6.7% in 2015.
Doubts persist over proposed TAPI gas
pipeline
Turkmenistan, the region’s strongest economy, is looking to
the construction of Asia’s most ambitious pipeline project
to provide the next leg of its economic development with
a plan to supply natural gas to Afghanistan, Pakistan and
India. On 13 December, Turkmenistan’s President Gurbanguly
Berdimuhamedow together with Afghanistan’s President
Ashraf Ghani, Pakistan’s Prime Minister Nawaz Sharif and
India’s Vice President Hamid Ansari jointly launched the
construction of the TAPI project in the eastern Turkmen
province of Mary.
At the ceremony, Berdymukhamedov said the pipeline
will start-up by December 2019, with an annual capacity to
deliver 33 billion m
3
of natural gas. Despite his confident
prediction, the project is shrouded in doubt owing to a
myriad of financial, political and security problems that have
repeatedly delayed its implementation the last two decades.
Oil and gas prices are hovering near seven year lows
and likely to go lower, threatening the viability of the
proposed pipeline that will criss-cross some of the
region’s most difficult terrain that are also vulnerable to
terror attacks. The project aims to tap Turkmenistan’s
giant Galkynysh field which holds estimated reserves of
16 trillion ft
3
of natural gas to feed the region’s growing
energy demand. Boosted by Galkynysh’s start-up in
September 2013, Turkmenistan has raised its annual natural
gas production to around 70 billion m
3
.
According to the US Energy Information Administration
(EIA), Turkmenistan, owner of the world’s fourth largest
gas reserves, exported 42.4 billion m
3
of the fuel through a
network of pipelines in 2014. More than half of that went
to China with the rest delivered mostly to Russia and Iran.
In the race for Central Asia’s oil and gas reserves, China has
locked up Turkmenistan’s rising gas output by signing a series
of long-term contracts for a total of more than 65 trillion m
3
by 2020.
China’s launch of the Central Asia-China Gas Pipeline in
2009 has given it a huge first-mover advantage on tapping
the region’s oil and gas reserves.
Worried that they will be left out of Central Asia’s
‘gas rush’, Afghanistan, Pakistan and India along with
Nepal and Bangladesh are hoping to hurry up the
development of TAPI with the Asian Development Bank
as project adviser.
According to the ADB, the state gas companies of the
four countries established a joint venture last year to build,
own and operate the pipeline to export up to 33 billion m
3
/y
of natural gas from Turkmenistan to Afghanistan, Pakistan,
and India for 30 years. The TAPI gas pipeline network will
be equally owned by state-owned Turkmengas, Afghan Gas
Enterprise, Pakistan’s Inter State Gas Systems (Private) Limited,
and GAIL (India) Limited.
Turkmengas and another state-owned firm,
Turkmennebitgazgurlushyk, have been tasked to design and
build the country’s section of TAPI and the main project’s
support infrastructure.
Of growing concern is that Turkmenistan, TAPI’s lead
developer, and the other consortium members have been
unable to attract the participation of international investors.
Malaysia’s Petronas and France’s Total have been mentioned
as likely participants, while US majors ExxonMobil and
Chevron have pulled out after their request for equity stakes
in Turkmenistan’s gas fields were rejected.
18
World Pipelines
/
FEBRUARY 2016
