Yet Another Delay For The Asia-China Gas Pipeline

The ill-fated fourth strand of the Central Asia-China gas pipeline has again been put on hold amid apparent sagging demand for the fuel from Beijing, Russian media outlets have reported.

A Tashkent-datelined RIA-Novosti news agency report on March 2 cited unidentified sources as saying China National Petroleum Corporation and state-owned oil and gas company Uzbekneftegaz have agreed on an indefinite postponement on work to the Uzbek section of the route.

The projected 1,000-kilometer Line D is designed to start in Turkmenistan, cross Uzbekistan, Tajikistan, Kyrgyzstan and end in western China, and will, if ever completed, boost the overall annual transportation capacity of the Central Asia-China pipeline network to 85 billion cubic meters. This strand constituted a shorter but diplomatically far more complicated route than the already functioning Lines A, B and C, which also rise into Turkmenistan but cross only Uzbekistan and Kazakhstan.

The three completed strands of the Central Asia-China pipeline currently allow for the export of around 55 billion cubic meters of gas annually — an amount equivalent to one-fifth of China’s consumption. According to a breakdown of existing contracts and capacity outlined by CNPC, Lines A and B are able to carry 13 billion cubic meters of gas from the Chinese-run Amu Darya Project at Turkmenistan’s Bagtyyarlyk field and another 17 billion cubic meters of gas sourced by Turkmengaz itself. Line C is intended to supply a mix of gas from Turkmenistan (10 billion cubic meters), Uzbekistan (10 billion cubic meters) and Kazakhstan (5 billion cubic meters).

In short, depending on what information one chooses to rely on, the pipelines are anything between mostly to almost completely full.

Progress on the fourth line has been a stop and start affair.

As far as the 200-kilometer Uzbek segment is concerned, a CNPC-Uzbekneftegaz joint venture was created in 2014 to take responsibility for the work, which it was estimated would cost $800 million.

Plans were initially for construction work to begin in April-May 2016, but that was pushed back to December. Officials were still singing an optimistic tune in January, when they were predicting that building would get underway in the second half of 2017.

But this is all so much hot air, as similarly slow progress elsewhere demonstrates.

In September 2014, Tajikistan held an official ceremony attended by Chinese premier Xi Jinping to mark the start of work on its section of the pipeline. Laborers on the phantom project say not a blind bit of work has been done since, however.

RIA Novosti’s source said this latest delay to Line 4 was agreed on a mutual basis by Uzbek and Chinese parties and that no date has been set for the resumption of operations. What is clear, however, is that spending for work on the pipeline has not been included in the state investment program for 2017 because of “unfinished work in preparation” and “operations at the joint venture,” according to the RIA Novosti report.

This spells yet more bad news for Turkmenistan, which is at the moment stuck with China as it is only customer, having fallen out with Iran over the New Year.

(Quick aside here though; pinning down quite how much gas Turkmenistan actually exports in any given year is a maddeningly enterprise, given that Ashgabat does not divulge the figures itself. For example, the International Energy Agency estimates that in 2016, when Turkmenistan was still supplying gas to Iran, the country exported 51 billion cubic meters. Meanwhile, Interfax news agency cites the BP Statistical Review of World Energy figure of 38.1 billion cubic meters for that same year, down from 41.6 billion cubic meters in 2015 — a fall seemingly attributable to dwindling purchases by Russia’s Gazprom. But Russian online news agency Regnum, which is believed to have links to security agencies in Moscow, offers a figure of 48 billion cubic meters for 2015. So, who knows?)

Despite the manifest failure of Turkmenistan’s diplomatic and commercial negotiating skills, President Gurbanguly Berdymukhamedov appears to be largely holding faith with his top energy officials.

Following his recent re-election, Berdymukhamedov would have had a straightforward chance to clear out shop, but he has instead stuck to his core team, indicating that no dramatic change of tack is imminent.

On March 3, Turkmen state media reported that Yagshygeldy Kakayev has been reconfirmed as deputy prime minister for oil and gas, a post he has filled since 2015. The previous head of Turkmenistan’s state gas company Turkmengaz, Ashirguly Begliyev, was fired in January, but only to be replaced by his deputy, Maksat Babayev. Elsewhere, Dovletdurdy Hajiyev took over at the top of the state oil company Turkmennebit, where he has been second-in-command since July 2014.

This ginger, tentative management of the energy sector has been a trademark of Berdymukhamedov’s rule and does not seem to have yielded many notable returns.

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