Central Asia seen as better bet for supplying China

South China Morning Post ( Hong Kong)
Headline: Central Asia seen as better bet for supplying China

Tethys chief says Kazakhstan and neighbours are more suited than Russia to Beijing’s needs

While Ukraine’s territorial dispute with Russia will facilitate a gas supply deal between Moscow and Beijing, Central Asia has better long-term potential as an energy supplier to China, the chief of Tethys Petroleum said. David Robson, executive chairman of the Toronto and London-listed oil and gas firm with Central Asian projects targeting China, believes the politics will be overridden by economic considerations and Europe will remain Russia’s main gas market.

“Certainly in the short term it will encourage Russian gas to go eastward rather than westward, but of course they still need gas in Europe and the logical place for the gas to come from is still Russia,” he said. “In the medium term, the [political issues] will be sorted out and we will see more gas going back to Europe again.”

China has been in talks for more than 15 years with Russia on importing natural gas from Siberia, but price differences meant no deal has been signed so far.

Gas price reforms to make mainland prices get closer to international prices and Russia’s desire to diversify its export destinations have narrowed the differences. President Vladimir Putin is due to meet President Xi Jinping in Beijing later this month to discuss issues including a possible 30-year gas supply deal.

Russian gas giant Gazprom and China National Petroleum Corp (CNPC) signed a framework agreement in 2009 that could see almost 70 billion cubic metres (bcm) sent via two pipelines entering northeast and northwest China by 2018.Still, Robson said Central Asia has more potential than Russia to supply China in the long term, since domestic demand is much smaller in Central Asia than in Russia.

American gas, though cheap domestically, will not be cheap by the time it lands in Europe, he said. According to BP Statistical Review, Turkmenistan, Uzbekistan and Kazakhstan together had 19.9 trillion cubic metres (tcm) of proved gas reserves at the end of 2012, of which Turkmenistan accounted for 88 per cent of the total. Russia had 32.9 tcm.

Russia exported 30 per cent of its 592 bcm of output in 2012, while the three Central Asian nations exported 43 per cent of their combined output of 141 bcm.

Some 29 bcm were sent from Turkmenistan and Uzbekistan to China last year, which is projected to rise to 55 bcm in 2017, according to a Citi research report.

Tethys was in talks with CNPC to sell 0.4 bcm of gas from its projects in Kazakhstan from next year, Robson said. Last June, it struck a deal with CNPC and France’s Total to jointly invest in the exploration and development of gas resources in Tajikistan.

(SCMP, Business Page, B4, 8 May 2014)