From the Editor: A quicker route to China? [Gas in Transition]

Russia’s prowess as the world’s biggest natural gas exporter has been significantly undermined by Moscow’s ill-fated decision to cut off supplies to so-called unfriendly countries in Europe in an effort to try and make them cease weapon deliveries to Ukraine and push Kyiv towards a peace deal.

Gazprom now pipes only 10-15% of the gas to Europe that it used to prior to the war in Ukraine. No surprise then that the Kremlin is scrambling for access to alternative markets – first and foremost China. But Moscow has so far failed to secure the necessary supply contract from Beijing that it needs to underpin construction of the 50bn m3/year Power of Siberia 2 pipeline. And if and when that contract is in place, it will be many years – possibly until the late 2030s, before the project is running at full capacity, if we consider the timeframe for Power of Siberia 1 as an example, even though that venture was less ambitious in scope.

As such, the Kremlin is looking for faster routes to the Chinese market. Rather than building thousands of km of new pipelines, it is looking to make use of existing infrastructure to achieve this.

This is the main idea behind Russian president Vladimir Putin’s proposal last year for a so-called gas union with Kazakhstan and Uzbekistan. It would involve reversing the flow of the Soviet-era Central Asia-China that once delivered Central Asian gas to Russia, so that Russian gas that once went to Europe can go to Central Asia instead.

Kazakhstan and Uzbekistan used to have gas spare for export to Russia but this is no longer the case. Both countries have seen demand grow in recent years and domestic supply stagnate. This has caused shortages, particularly amid last winter’s abnormally cold temperatures.

Reversing the flow of Central Asia-Centre would be a relatively simple task, at least compared with building a new pipeline like Power of Siberia 2, all the way from the Russian Arctic and through Mongolia. It would involve some modernisation of the pipes, and the installation of new compressor stations.

But as stated, the aspiration is China. The Kremlin’s vision is to pump gas through both Kazakhstan and Uzbekistan, where it could be fed into the Central Asia-China pipeline system.

Kazakhstan and Uzbekistan initially appeared hesitant about Russia’s gas union proposal, perhaps suspicious of what the Kremlin would demand in return for providing them with additional gas supply, such as greater control over their own gas grid infrastructure. But both now seem receptive.

Uzbekistan signed a two-year deal with Russia in June for 2.8 bcm of gas supply annually, and in August, Kazakhstan’s government revealed that it was in discussions with the Russian side on the transit of somewhere between 1.5 and 10 bcm of annual gas supply to Uzbekistan. The wide range of potential volumes indicates the uncertainty about whether the Russian gas deliveries would reach only Uzbekistan, or go onwards to Turkmenistan and then to China.

Opposition from Ashgabat

The thorn in Russia’s plan appears to be Turkmenistan, which has already hinted its opposition to the idea of having Gazprom share the capacity of the Central Asia-China pipeline. When Russia’s government recently suggested that more countries could join the gas union – a likely reference to Turkmenistan – Ashgabat’s government said it had not been consulted on the matter.

The deputy chairman of Turkmenistan’s state-owned Turkmengaz, Myriad Archaev, notably added that “plans to expand the number of participants in the Turkmenistan-China gas pipeline project are not included.”

There is ample spare capacity in the pipeline for Russian gas. Central Asia-China has never flowed at its full capacity of 55bn m3/yr. This is largely because projections for future supply from all three Central Asian countries did not live up to expectations. Turkmen gas flow typically ranges between 30-35bn m3/yr, with additional supplies provided by Kazakhstan and Uzbekistan, which are falling because of the above-mentioned issues with meeting domestic needs.

This is the main reason while Beijing has been hesitant to back the adding of a fourth line to Central Asia-China that would increase its capacity to 85bn m3/yr. However, that project will likely gain greater momentum as Chinese gas demand inevitably increases over the years, if Turkmenistan and/or Russia can step up to provide the necessary supply.

Turkmenistan’s opposition to Russia accessing the pipeline system is understandable. It fears that this will weaken its bargaining position in potential negotiations with Beijing for additional supplies, or crowd them out altogether. But this opposition is unlikely to pose a serious problem for Russia’s ambitions. Ultimately it will be China that decides, if it supports the construction of a fourth pipeline string, who gets to fill its capacity.