Kazakhstan opens oil pipeline to China

A new oil pipeline to carry oil to China from Kazakhstan has formally been inaugurated, brightening Beijing's prospects of reduced dependence on Middle Eastern crude.

    Kazakh President Nazarbayev launched the pipeline

    With the push of a button, Nursultan Nazarbayev, the president of Kazakhstan, put the $806 million pipeline into service on Thursday from the control centre of state-run KazTransOil in the Kazakh capital of Astana.

    "This is an event of the utmost importance for economic and commercial relations between China and Kazakhstan," President Nazarbayev said.

    The 1000km pipeline linking Atasu in central Kazakhstan to Alashanku in western China will now start to fill with Kazakh oil from the central Kumkol field. The route covers some of the world's most inhospitable territory, with extreme temperature ranges and earthquake-prone zones.

    But the pipeline, jointly developed by the China National Petroleum Corporation (CNPC) and the Kazakh state energy company Kazmunaigaz, is a first milestone in a more ambitious project: to link Chinese consumers to the far bigger oil fields of  the Caspian Sea.

    Growing demand has forced China
    to look for new energy sources

    Kazakhstan's authorities say the extension should be complete by 2011, with capacity also doubled. The total length would then be some 3000km.

    Chinese strategy  

    Oil analysts said the new pipeline was an important step in Beijing's effort to reduce its reliance on Middle East supplies at a time when the country's energy needs are soaring.

    "The new Kazakh pipeline is small but it signals a real Chinese interest in trying to move away from Middle East oil," said Kuen Woon Paik, a researcher at Chatham House, a London think tank.

    Beijing also is negotiating with Russia over the construction of a proposed pipeline to deliver Siberian oil. That line, to be completed as early as 2008, would carry about 380,000 barrels per day.

    "Both the Kazakh and Russian lines will help China get away from dependence on Middle East oil," said Gavin Thompson, who works in Beijing for the British oil consulting firm Wood Mackenzie.

    The new pipeline is also a step towards breaking Kazakh dependence on its former master Russia for export routes.

    Deliveries are expected to start only in mid-2006, with an initial annual capacity of 10 million tonnes.

    Increased flow

    But that trickle, still dependent on Russia's participation due to a huge gap in Kazakhstan's pipeline network, could become a flow once further pipelines are built westward to the Caspian.

    "This is an event of the utmost importance for economic and commercial relations between China and Kazakhstan"

    Nursultan Nazarbayev,

    Kazakhstan president

    "This is the start of a long road to bring big Kazakh oil to the East," Kazakh oil minister Vladimir Shkolnik said.

    China's growing role in Kazakhstan thus far appears to have caused little anxiety in Moscow.

    Kazakh deliveries to China lessen pressure on Russian producers to sell to China rather than other markets where higher prices can be expected, analysts say.

    By contrast, Russia gave a distinctly frosty reception to the inauguration earlier this year of the Washington-backed  Baku-Tbilisi-Ceyhan pipeline that runs from the Caspian Sea to Turkey's Mediterranean coast, and is set to carry oil from Azerbaijan and later from Kazakhstan.

    Thanks to such deals, Kazakhstan is forecast to become one of the top 10 world oil producers within a decade. The government wants to raise oil exports from about 1.2 million barrels a day this year to 3.5 million barrels a day in 2015.

    SOURCE: Agencies


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