Kazakhstan: oil pipeline to China a new reality of global politics
THE COMMISSIONING of the Kazakh-Chinese oil pipeline in May was an event of global importance: it is the first eastward pipeline from Kazakhstan, which had supplied its oil only to the West before; and it is the first oil by pipeline that China will receive. For Russia, the pipeline is part of its eastern economic policy, which is gaining importance in Moscow.
The 32-in diameter, 988-km long Atasu-Alashankou pipeline will eventually deliver up to 20 million tons of oil a year to the Xinjiang Uygur province of China, and is the second phase of a more-ambitious project (see below). The province, which is located closest to the European part of Russia, had been regarded until recently as a dormant and underdeveloped part of China: the situation has now changed. The conclusion is that processes of interest to Moscow are gathering momentum there, and Moscow is actively involved in them.
Prior to the construction of the pipeline, oil exports to China were minimally beneficial to Russia (disregarding deliveries by rail across the Russian Far East). However, oil trade with China promises huge returns, because China needs up to 150 million tons/yr of crude, and spent $50bn on oil imports last year. Russia has become the top global hydrocarbons supplier, pushing aside Saudi Arabia. China, which is a direct neighbor of Russia, currently receives up to 80% of its oil imports by sea, via the Strait of Malacca, and mostly from the Middle East. This is a high-risk situation for China also because it owns only one of the ten tankers that carry its oil.
The Pacific pipeline, or rather its leg delivering oil from East Siberia to China’s NE province, was considered crucial for the Russian oil sector. It is a huge project that needs joint investments in pipeline construction and oil exploration in East Siberia. Its route was determined only recently, and it will pass a respectable distance from Lake Baikal, which is an environmental preserve. This is a now seen as a major project that will change the outlook of Eastern Russia, and will take years to accomplish.
Meanwhile, the NW oil pipeline to Xinjiang has been built in less than two years and cost “only” $700 million. Most importantly, this is not a single Kazakh-Chinese project, but the beginning of a policy of creating a new pipeline system in which not only Russia, but also several Central Asian states, will participate in one way or another.
The supply of Russian raw materials to the NW provinces of China was discussed during the recent Chinese visit of President Vladimir Putin. In principle, Russia can use the Kazakh pipeline to deliver its oil to China, because a network of pipes links Kazakhstan and Russia. In its western regions, Russia is traversed with a network of pipelines, which reflects modern realities of economic co-operation between it and Europe. However, there are no such international networks on the SE border of Russia, because co-operation between the regional countries there has not been as active as in Europe. But the regional integration of oil pipelines is now merging into a network. A relevant example is the plans of Kazakhstan and China to lay a gas pipeline parallel to the oil pipe, made public recently by Kazakhstan’s President Nursultan Nazarbayev and China’s vice-President Zeng Qinghong.
Kazakhstan’s key oil partner is the Untied States, primarily its oil giant Chevron, while Russia is its largest gas production and transportation partner. The Kazakh and Russian governments are planning the modernization of pipeline networks and intend to join forces to modernize the gas pipelines from Central Asia to Russia, from Bokhara to the Urals, and several others.
Another gas-rich regional country is Uzbekistan, which is a transit territory for gas deliveries from Turkmenistan to China. Instability or economic underdevelopment of any of the neighboring states, for example Kyrgyzstan or Tajikistan, would affect the security of such pipelines. In a way, the whole of Central Asia is a transit region for economic plans there. The Shanghai Cooperation Organization – a joint project of Russia, China, and Central Asian states – is one more reflection of this new reality.
The construction of the Atasu-Alashankou pipeline forms a part of the 3000-km, $3-billion, Kazakhstan-China Transnational Pipeline project, which was created by an inter-governmental agreement for co-operation in the oil and gas business between Kazakhstan and China, signed on September 24, 1997. The aim is to provide a new export route for Kazakhstan’s crude oil. The final decision to construct the pipeline was made during President Nazarbaev’s visit to China in May, 2004, when the basic agreements were reached for the pipeline construction from Western Kazakhstan to Western China.
The capacity of this phase of the overall project – the Atasu-Alashankou pipeline, now operational – is about 10m tons/yr; the next phase will increase this to 20m tons/yr, and is scheduled for commissioning in 2011.
The first phase of the project was the construction of the 448.8-km Kenkiyak-Atyrau pipeline in 2003, built in order to export crude oil from the Kazakhstan’s Aktyubinsk fields to export markets via the CPC pipeline and the Atyrau-Samara pipeline.
The new Atasu-Alashankou pipeline forms the second phase, and it runs from the rail oil-loading facility at Atasu across the Karaganda, Eastern Kazakhstan, and Almaty regions to the Chinese border. The line is transporting oil from the PetroKazakhstan’s Yuzhno-Turgai basin (in the Kyzyl-Orda region of southern Kazakhstan) and Russian crude from Western Siberia in equal proportion.
The editor acknowledges the assistance of RIA Novosti’s political commentator Dmitry Kosyrev in the preparation of this article.