Kazakhstan is negotiating with China to increase natural gas exports

As Bloomberg reported, Kazakhstan is negotiating to increase natural gas exports to China, including through a new pipeline, noting that this would put Kazakhstan in competition with Turkmenistan and Russia.

“Despite reports of an economic slowdown in China, demand for gas continues to grow,” Sanzhar Zharkeshov, chief executive of Kazakh national gas operator QazaqGaz, told Bloomberg. “We hope to reach a consensus on increasing our export volume to China and possibly other countries such as Uzbekistan.”

So far, Kazakh natural gas exports to China have been quite modest at 4 billion cubic meters per year. This represents almost all of the country's natural gas exports, which stood at just over 5 billion cubic meters in December last year. For comparison: Kazakhstan itself consumes 21 billion cubic meters of gas annually. However, the country wants to increase both domestic supply and export supply to generate additional revenue. China is the natural main target for this additional revenue.

To enable higher exports, the Kazakh state is working with oil and gas producers in the Caspian Sea to encourage higher production. One measure for this is a new gas pricing formula, QazaqGaz's Zharkeshov told Bloomberg. The government also plans to increase production by 3.5 billion cubic meters per year over the next five years with the help of Qatari investors, the Bloomberg report said.

Increasing exports to China would require building a new pipeline connection to an existing line that is operating at only 70% of its capacity. According to Scharkeshov, the new pipeline would cost between $3 billion and $6 billion. The decision on whether to proceed with the project will be made later this year. The construction work will take between two and three years.

China became the largest importer of liquefied natural gas last year, absorbing the equivalent of 16 billion cubic feet a day, the U.S. Energy Information Administration reported in August. Pipeline imports are an important alternative source of gas for the Asian powerhouse as demand continues to rise.

By Irina Slav for Oilprice.com

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