(EnergyAsia, April 3, 2017, Monday) — Central Asia’s weakening economic confidence has been further battered by reports that China has indefinitely delayed the planned expansion of a major pipeline network to import natural gas from the region.
According to Russian and Chinese news reports, Beijing has decided not to proceed with building the fourth and largest branch or “Line D” of the eight-year-old pipeline network supplying natural gas from Turkmenistan, Uzbekistan and Kazakhstan to China. The 1,000-km-long Line D was designed to add 30 billion cubic metres/year (bcm) to the network’s existing 55-bcm capacity.
Construction was to have started shortly after Chinese President Xi Jinping and his Tajikistan counterpart, Emomali Rahmon, held a joint ceremony for the project’s launch in the Central Asian country in September 2014. The event was held four months after oil and gas prices began what turned out to be a prolonged collapse. Like many project developers around the world, Line D’s proponents were caught out by the length and severity of the price rout.
Despite Beijing’s assurance that the project was central to both its Central Asia policy and the nation’s energy security, the continuing weakness in oil and gas prices undermined the project’s feasibility that led to at least three postponements in 2016 and 2017.
The biggest blow to Line D’s hopes was delivered by Saudi Arabia’s King Salman during his landmark visit to Beijing in March. Supported by a large entourage including state energy firm Aramco, the king underlined his government’s eagerness to meet China’s long-term energy demand at the expense of rival oil and gas suppliers in the Middle East and Central Asia.
Aware of the growing supply competition from Russia, Iran and the US, Turkmenistan, Uzbekistan and Kazakhstan have been pushing China to begin Line D’s construction that would also help their slowing economies.
Turkmenistan, with the world’s fourth largest natural gas reserves, catalysed the Central Asia-China gas connection with the start-up of the first export pipeline in late 2009. The pipeline’s impact on the Turkmen economy was immediate and stunning as gas sales to China sent growth surging 11.7% in 2010, 29.4% in 2011 and 20.3% in 2012, according to the World Bank. By 2014, just when oil and gas prices started to slide, Turkmenistan’s GDP had exceeded US$43.5 billion to more than double its 2009 size.