Kazakhstan is set to start gas exports to China from October 15 based on a one-year deal national gas transportation operator KazTransGaz said it signed Tuesday with PetroChina International Company Ltd.
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The deal foresees 5 Bcm of gas supply and follows a memorandum of understanding between KazTransGaz and PetroChina's parent company CNPC signed in June.
KazTransGaz expects export revenue of $1 billion from the deal, it said.
Gas will come from fields in Western Kazakhstan as well as KazTransGaz' underground storage and flow to Khorgos border point, crossing Uzbekistan, the operator said in a statement.
To ensure stable gas flow to China and to its southern regions, Kazakhstan signed an intergovernmental with Uzbekistan allowing gas transportation from western Kazakhtstan to its southern parts and to China via Uzbekistan, it said.
Gas is to flow via the Beineu-Bozoi-Shymkent pipeline, running west to southeast Kazakhstan, then linking into the Kazakhstan-China pipeline, part of the larger 7,500-km (4,650-mile) Turkmenistan-Uzbekistan-Kazakhstan-China trunk pipeline.
The expansion of the Beineu-Bozoi-Shymkent pipeline capacity to 10 Bcm and that of Kazakhstan-China pipeline to 55 Bcm/year this year, will allow the start of Kazakh gas exports to China, according Kazakhstan's energy ministry.
BOOSTING GAS TRANSIT, OUTPUT
Kazakhstan currently exports no gas of its own to China but has ambitious plans to bring gas exports and transit to China to 100 Bcm/year in the future, KazTransGaz' deputy head of transformation and development, Erkanat Temirkhanov, was quoted as saying at an industry event last week by the Kazinform news agency.
"So far, Kazakhstan can easily transport 10 Bcm to China alone, but is working with Turkmenistan, Uzbekistan and Russia's Gazprom," he said.
Energy minister Kanat Bozumbayev has warned that Kazakh gas would face strong competition from Turkmen, Uzbek and Russian gas supplied under long-term contracts with China.
Volumes from Turkmenistan and Uzbekistan are transported through the Central Asia-China gas pipeline network that links up with CNPC's Second West-East Pipeline in western Xinjiang province on the border with Kazakhstan.
Russia's Gazprom has a 30-year contract for 38 Bcm/year gas supplies to China via Power of Siberia, expected to have its first gas flows in late 2019, and plans to sign a legally binding agreement with CNPC on additional gas supplies by the year-end, according to the company.
Kazakhstan's gas production is expected to rise by 3.2% on the year to 48.1 Bcm this year, mainly from the Karachaganak, Tengiz and Kashagan fields, Bozumbayev estimated earlier this year.
Kazakhstan is prioritizing domestic supplies on expectations of further natural decline at its key fields by 2025, according to the ministry.
However, ice minister of energy Magzum Mirzagaliyev estimated last week that Kazakh gas output would grow by 4% a year on average until 2040, according to an article by kapital.kz posted on the ministry's website.
The forecast is based on expectations of large hydrocarbon fields turning more into gas fields with the depletion of crude reserves, and less gas flaring at the fields, Mirzagaliyev said.
The country currently exports about 30% of its natural gas production, with another 30% consumed domestically and the rest reinjected to maintain reservoir pressure for crude oil production, he added.