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Central Asian Oil & Gas Development: Alternative Infrastructure Solutions

Central Asian Oil & Gas Development: Alternative Infrastructure Solutions. Vladimir Milov Carnegie Endowment for International Peace Washington D.C., October 23 rd , 2007. Why the search for oil & gas transit alternatives is vital for Central Asian nations?.

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Central Asian Oil & Gas Development: Alternative Infrastructure Solutions

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  1. Central Asian Oil & Gas Development:Alternative Infrastructure Solutions Vladimir MilovCarnegie Endowment for International PeaceWashington D.C., October 23rd, 2007

  2. Why the search for oil & gas transit alternatives is vital for Central Asian nations? • Dependence on the Russian transit monopoly • Kazakhstan’s challenge: how to evacuate additional oil if the oil production grows from 1.5 mbd to 3 mbd by 2015? • Turkmenistan’s challenge: how to diversify gas exports, ensure direct access to consumers other than Russia, and ensure fair level of gas export prices?

  3. Kazakhstan’s oil production surging… * Projection of the Kazakhstan government

  4. …but how this new oil will be evacuated? • Atasu-Alashankou oil pipeline to China: first stage completed, expansion expected • Shipments of oil via Baku-Tbilisi-Ceyhan pipeline remain an option • At the same time: • No real progress with CPC expansion – transit through Russia remains a problematic option • Question’s rise with regard to the consequences of the recent Kazakh government attacks on foreign investors (the Kashagan consortium)

  5. Potential alternative routes of evacuation of new Turkmen gas • Trans-Caspian gas pipeline • Trans-Afghani gas pipeline • “Caspian” gas pipeline via Kazakhstan and Russia • Various options of gas supply to/via Iran • Turkmenistan-China gas pipeline

  6. Unresolved Caspian disputecan effectively block the construction of any Trans-Caspian pipelines • Bargaining among Turkmenistan and Azerbaijan on Kyapaz/Serdar, Azeri/Khazar, Chirag/Osman fields continues • No progress achieved at the summit of the heads of Caspian littoral states on October 16th, 2007, in Tehran • Very hard to imagine a common position between Turkmenistan and Azerbaijan can be reached any time soon Trans-Caspian gas pipeline remains a dream.

  7. “Caspian” pipeline • Despite massive media coverage of the trilateral Russia-Kazakhstan-Turkmenistan summit of May 12th, 2007, no real progress on the pipeline construction has been observed ever since • Governments of the three countries were supposed to come up with “specific” agreement on pipeline construction by September 1st, 2007 – but that still didn’t happen • In fact, hardly any negotiations are taking place • Turkmen gas supply guarantees to Russia (50 bcm/year) expire at the end of 2009 • Currently, an issue of severe gas supply price increase apparently will dominate the agenda of Russian-Turkmen gas relations Map: East European Gas Analysis “Caspian” gas pipeline also remains a dream.

  8. Turkmen gas: more and more expensive for Russia * Monetized equivalent of a price used in barter transactions ** As suggested by Turkmen President G.Berdymukhammedov in September 2007

  9. Other alternative options for Turkmen gas supplies • Trans-Afghani pipeline remains controversial both on security, resource base and economic grounds • Trans-Iranian pipeline probably would work, but the United States would most likely do their best to block it’s construction

  10. Turkmenistan-China gas pipeline: the most realistic to-date alternative for Turkmen gas • Fundamental link with upstream access (right bank of Amudarya, other fields) makes the project advantageous to China as compared to the Russian gas pipeline project • Project not plagued with complicated geopolitics as compared to other competing projects • China is capable of resolving problem issues of gas transit via Kazakhstan and Uzbekistan • Although price issue is still unresolved, the project has good perspectives for moving forward Above: picture of symbolic first section of Turkmenistan-China gas pipeline laid on August 30th, 2007

  11. Big questions surrounding the development of Turkmen gas production • Remaining lack of clarity on resource base • Will the opening of upstream sector to foreign investment ever happen? • Is Turkmenistan seriously considering a breakaway from a Russian gas transit monopoly, or simply using this threat to push Russia to agree for a higher gas purchase price?

  12. Conclusions • Central Asian countries are very close to the potential break-up of the Russian oil & gas transit monopoly • However, the net winner appears to be China, not the European market • Successful development of the upstream oil & gas production in Central Asian countries is challenged by either worsening attitude to foreign investors (Kazakhstan) or the lack of it’s openness to foreign capital (Turkmenistan)

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