Turkmenistan ended 2016 as China’s biggest natural gas supplier, however, the former Soviet republic simply substituted its dependency on Moscow with Beijing.
China’s Biggest Supplier
During the seven years following the completion of the transcontinental Central Asia-China pipeline, China imported 5.4 trillion cubic feet of natural gas from Turkmenistan. Such was the figure voiced by the China National Petroleum Corp’s (CNPC) General Manager in charge of the Turkmenistan branch, Deng Minmin, at the Oil and Gas Turkmenistan 2016 conference in Ashgabat in December last year.
However, when looking at the bigger picture, the reality is that Turkmenistan did not lower its dependency on foreign buyers, specifically Russia, who bought most of Turkmenistan’s gas. Instead, Turkmenistan simply replaced Russia’s role with China.
The notion that Turkmenistan’s gas dependency on China is as much of a problem, as in the case with Russia, is supported by the fact that while export volumes increased, revenues from natural gas sales have actually declined in 2016.
At the same time, China’s other natural gas suppliers can hardly compete with the holder of the world’s fourth largest natural gas reserves. In 2016, Turkmenistan provided the PRC with more than three fourths of its imported volumes.
In the future, Ashgabat’s role as China’s number one gas supplier could strengthen due to China’s resent policies of reducing the use of coal in energy production and substituting it with more environmentally friendly natural gas. This does not necessarily spell better economic conditions for Turkmenistan, as the country’s pool of customers remains very much one-sided.
Beijing for Moscow
In 2009, the same year when relations between Turkmenistan and Russia took a turn for the worse (more on the subject can be read here), China eagerly jumped in to fill the gap left by Moscow. In December of that year, the first 4,350-mile long line of the Central Asia-China pipeline, with a capacity of 1.4 trillion cubic feet per year, was completed. The pipeline links Turkmenistan and China and goes through Uzbekistan and Kazakhstan. The first dispatch of natural gas via the pipeline occurred in 2010.
However, Turkmenistan’s gas cost less for China than it did before for Russia, but Turkmenistan couldn’t afford to be particularly picky.
As Turkmengaz’s Chair Begliyev previously stated, by 2030 Turkmenistan plans to more than triple natural gas production to eight trillion cubic feet per year, while export volume is set to grow from 1.6 trillion currently to 6.35 trillion. All the while China will remain Turkmenistan’s main buyer.
Still, chances are that production expansion plans will be left as plans. Other than China and Iran, the latter being a large natural gas producer in its own right, Turkmenistan’s opportunities for selling excessive gas volumes are scarce. The fate of the Trans-Caspian pipeline, which could potentially provide Turkmenistan access to the European markets, is in question and the prospects of the TAPI pipeline to India are significantly undermined by the developments in Afghanistan. Therefore, Turkmenistan’s dependency on China could only increase in the foreseeable future.