Central Asian Oil

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Central Asian Oil Gas DevelopmentAlternative
Infrastructure Solutions

• Vladimir MilovCarnegie Endowment for
  International PeaceWashington D.C., October
  23rd, 2007

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Why the search for oil gas transit alternatives
is vital for Central Asian nations?
Dependence on the Russian transit monopoly
Kazakhstans challenge how to evacuate
additional oil if the oil production grows from
1.5 mbd to 3 mbd by 2015? Turkmenistans challeng
e how to diversify gas exports, ensure direct
access to consumers other than Russia, and ensure
fair level of gas export prices?
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Kazakhstans oil production surging
Projection of the Kazakhstan government
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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 progr
ess with CPC expansion transit through Russia
remains a problematic option Questions rise with
regard to the consequences of the recent Kazakh
government attacks on foreign investors (the
Kashagan consortium)
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Potential alternative routes of evacuation of new
Turkmen gas
Trans-Caspian gas pipeline Trans-Afghani gas pipe
line Caspian gas pipeline via Kazakhstan and Ru
ssia Various options of gas supply to/via Iran T
urkmenistan-China gas pipeline
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Unresolved Caspian dispute can 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 t
he heads of Caspian littoral states on October
16th, 2007, in Tehran Very hard to imagine a comm
on position between Turkmenistan and Azerbaijan
can be reached any time soon
Trans-Caspian gas pipeline remains a dream.
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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 didnt happen In fact, hardly any negotiati
ons are taking place Turkmen gas supply guarantee
s to Russia (50 bcm/year) expire at the end of
2009 Currently, an issue of severe gas supply pri
ce increase apparently will dominate the agenda
of Russian-Turkmen gas relations
Map East European Gas Analysis
Caspian gas pipeline also remains a dream.
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Turkmen gas more and more expensive for Russia
Monetized equivalent of a price used in
barter transactions As suggested by Turkmen Pr
esident G.Berdymukhammedov in September 2007
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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 its construction
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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 com
plicated 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 unresolv
ed, the project has good perspectives for moving
forward
Above picture of symbolic first section of
Turkmenistan-China gas pipeline laid on August
30th, 2007
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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?
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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
its openness to foreign capital (Turkmenistan)