New branch of Central Asia-China gas pipeline comes online

China National Petroleum Corporation (CNPC) reported in early June that a third branch of the Central Asia–China gas pipeline, also known as line C, had been inaugurated on 31 May, with the first volumes of Turkmen gas now following a new export route across Uzbekistan to the Chinese autonomous region of Xinjiang.

The 1,830km pipeline runs parallel with lines A and B, starting at Gedaim at the Turkmen-Uzbek border and entering Chinese territory at Khorgos. Once in China, it interconnects with the third west-east gas pipeline, which was built by Beijing to take imported natural gas deeper into the country’s heartland and to the east coast where the bulk of its industrial production takes place. Construction of this additional line was started in September 2012 and welding was completed, as initially foreseen, at the end of last year.

CNPC expects that, on completion of all supporting facilities by early 2016, line C will reach its designed annual transit capacity of 25 billion cubic metres. This means that, if all goes to plan, the Central Asia–China gas pipeline will be able to deliver on an annual basis up to 55bcm of Turkmenistan-produced natural gas to Chinese customers. This will represent roughly 20% of China’s domestic gas consumption.

With this in mind, the authorities should proceed to a massive substitution of gas for coal. Reducing coal consumption by 73 million tons a year may allow China to cut its carbon dioxide and sulphur dioxide emissions by 78 million tons and 1.21 million tons respectively. If Turkmenistan delivers on its November 2011 promise to supply as much as 65bcm of gas a year, millions of Chinese will see clearer skies.

For Turkmenistan, the expansion of the Central Asia–China gas pipeline system means that its revenues from the lucrative energy sector will remain stable in decades to come. Unlike Kyrgyzstan and Tajikistan, whose political stability has been compromised by high levels of poverty and the lack of economic opportunities, Turkmenistan has all it needs to remain a deeply autocratic regime with enough gas money to silence domestic critics and secure obedience from ordinary Turkmens.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Turkmenistan: Striking lucky again with new gas find

Turkmenistan has discovered a potentially major new gas field in the east of the country, the government says, boosting confidence that it can fulfil its ambitious gas contracts with China. The new find is on the Shiringuyy structure in the Bagtyyarlyk contract area, located in Lebap province. Bagtyyarlyk has been jointly developed by Turkmengaz and China National Petroleum Corporation since 2007. Last year the Chinese energy giant announced plans to increase production there from 5.5 billion cubic metres a year to 6.5 billion, a target that this field will go some way to fulfilling.

Preliminary estimates suggest that the find is capable of producing an impressive 1.5 million cubic metres/day. This would make a significant contribution to the Turkmenistan-China pipeline, which is supplied by the Bagtyyarlyk contract area. At the end of last year construction began on a new compressor station to allow Shiringuyy gas to be fed into the pipeline. The station will be complete by 2014 and will be able to process 9bcm of gas every year.

Turkmen media have yet to release details on the production timeframe or the geological conditions of the new field.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Al-Ahdab oil field raided by Iraqi provincial officials

Iraq's Oil Ministry has accused provincial officials and local police of raiding an oil field, in the southern province of Wasit, currently developed by China National Petroleum Corporation (CNPC). A local council member, Majed Askar, said the officials went to the field on Sunday [26th September] to investigate complaints over the contracts signed by the Iraqi government and CNPC.

The Oil Ministry released a statement saying that the Al-Ahdab oil field was a sovereign site subject to the control of the federal government only and, "intervention of the provincial councils in the ministry's job is a clear legal violation".

The Wasit council party and police demanded to see copies of all contracts signed by the Chinese company, said Chief engineer at the field Ahmed Abdul Ridha.

"When we saw the situation was about to explode and that armed clashes may occur, to maintain the lives of the Chinese, we allowed them to enter with their arms," said Ridha.

The Al-Ahdab was the first major oilfield development contract awarded by the Iraqi government after the US-led invasion in 2003. A CNPC official said the raid will not impact the company's work.

"We can't say we're not annoyed by this action. But we still consider it a domestic issue and we're confident the oil ministry will solve this problem. We are watching closely and we do not expect any effect on our work in the field," he added.

It is believed that Wasit council has formed a committee to investigate the contracts, worth $3 billion, to determine whether or not they had been signed without being tendered. Iraq's Oil Ministry has since issued a statement, saying all contracts between oil firms and the ministry were signed with the approval of the federal government and rebuked Wasit council for, "entering the site forcibly and using military force".

An Oil Ministry spokesman, Asim Jihad, said the ministry would file legal action against provincial council members who trespassed on the site.

Source: Upstream Online

For more news and expert analysis about Iraq, please see Iraq Focus.

PK to pay damages to end Turgai dispute

Petrokazakhstan (PK), the 120,000 b/d producer which is 33 per cent owned by Kazmunaigas EP and 67 per cent by China National Petroleum Corporation (CNPC), has resolved a long-running legal dispute with Lukoil surrounding the Turgai Petroleum joint venture in which PK and the Russian giant are equal partners.

Under the settlement, which is based upon an arbitration ruling last year by the Stockholm Chamber of Commerce, PK will pay Lukoil damages of around $438 million to resolve a legal spat that dates back to PK's acquisition of a 50 per cent stake in Turgai Petroleum in 2005after PK was acquired by CNPC.

Lukoil filed a lawsuit claiming that it had pre-emption rights on the sale under the joint venture charter and this was backed up by the Stockholm court.

All the damages will be paid by CNPC. KMG EP, which had no role in the dispute, is absolved from any responsibility. In a statement, Lukoil said the settlement “represents the opening of a new relationship and further strategic cooperation” with CNPC, which is now the dominant foreign player in the Kazakh oil sector. Turgai Petroleum, which was established in 1995 as Lukoil-Kumkol, currently produces from the Kumkol oilfield. Most of the barrels are pumped east to China via the 920km pipeline which is jointly owned and operated by KMG and CNPC and will have its capacity doubled to 400,000 b/d by 2013.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2010 Menas Associates

CNPC to start drilling Iraq's Halfaya field

China's National Petroleum Corporation (CNPC) has said that it will start drilling new wells next month in Iraq's Halfaya oil field as part of a plan to boost output to 70,000 b/d in 2011.

Iraq signed a contract with CNPC, Total and Petronas signed a contract to develop Halfaya oil field for a fee of $1.40 per barrel. CNPC has a 37.5 per cent interest in the consortium.

CNPC plans to build three appraisal wells this year, and is currently in the process of evaluating bids for the tender. The group's executive, Yan Shihe, said CNPC hopes to reach production of around 70,000 barrels per day and aims to drill around 15 new wells by 2011.

Source: Reuters

For more news and expert analysis about Iraq, please see Iraq Focus.