kazakhstan china
TRANSCRIPT
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Globalization and environment
Kazakhstan and China for oil – examine Kazakhstan external relations to China in relation to oil
Lau Yin Yu Nina
52226060
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Outline• Kazakhstan
• China
• Bilateral Oil Cooperation
• Kazakhstan-China Oil Pipeline
• Restraints
• Conclusion
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Kazakhstan• The largest energy producer and exporter in the Central
Asian and Caspian region, has generally pursued economic policies based on oil-led economic development.
• In the 1990s, Kazakhstan’s political and economic elite pushed more vigorously than others in Central Asia for privatization and other pro-market economic reforms – and some economists have argued that the imperative of achieving greater economic independence from Russia pushed them further in that direction.
• Oil remains its most important industry and most valuable export
• “Resource Nationalism”
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Kazakhstan
• The country's main oil reserves are located in the western part of the country,
where the five largest onshore oil fields (Tengiz, Karachaganak, Aktobe,
Mangistau, and Uzen) are located
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CHINA• New Resource Warriors
• The majority of China’s imported energy comes from the Middle East and Africa, accounting for 45% and 28.7%
• China’s demand for oil is expected to more than double by 2030.
• “pipelines through China from Central Asia and Russia would help to diversify Northeast Asian energy supply - reducing the region’s dependence on supplies from the Middle East” (Christoffersen)
• Aspirations to become a global energy player
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Bilateral oil cooperation
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Bilateral oil cooperation
• September 1997: Framework Agreement on Projects for Fields Development and Construction of West Kazakhstan-China Oil Pipeline between CNPC and Ministry of Energy and Natural Resources of Kazakhstan
– Pipeline to go from Atyrau to Alashankou – CNPC will secure minimal guaranteed transportation volume of 20 mty and financing for the project
• 1999: Agreement on Cooperation in the Oil and Gas Sector between the Governments of Kazakhstan and China
• 2003: Agreement on Joint Study of the Two-Stage Construction of the Kazakhstan-China Pipeline between KMG and CNPC
– Agreed to prepare Feasibility Study for two-stage construction of the pipeline
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Bilateral oil cooperation
• 2004: China and Kazakhstan announced the building of the oil pipeline from western Kazakhstan to Xinjiang; Agreement on the Main Principles for Construction of the Atasu-Alashankou Pipeline between KMG and CNPC
• 2005: Agreement on Joining KazTransOil’s and Atasu-Alashankou Pipeline Systems
• 2006: Agreement on Operation and Maintenance of the Atasu-Alashankou Pipeline between Kazakhstan-China Pipeline company and KazTransOil
• October 2009: China and Kazakhstan completed an extension of the oil pipeline all the way to western Kazakhstan.
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Agreement on collaboration in oil and gas sector
• 1997
• Both states will undertake all necessary measures and actions to support and encourage the establishment of direct connections between corresponding agencies, enterprises and companies; and will research further approaches to develop the oil and gas sector and the extension of its scope.
• Supported the construction of a pipeline which would connect the Western part of Kazakhstan with the Western region of China.
• China approved the Chinese National Petroleum Corporation (CNPC) as the company responsible for the construction of a pipeline, the financing arrangements and the preparation of the Technical- Economical Justification of the project.
• Kazakhstan agreed to provide land lots and construction sites for the construction of a pipeline, guaranteed to provide pipeline security, and also stabilized the export duties for oil and import taxes for the necessary construction equipment.
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Kazakhstan-china oil pipeline
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Kazakhstan-china oil pipeline
• Partnership:
• KazStroyService: the leading engineering-construction company in Kazakhstan
• KazMunayGas: the state-owned oil and gas company of Kazakhstan
• China National Petroleum Company (CNPC): one the world’s largest oil and gas suppliers, providers and engineering-construction firms
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Kazakhstan-china oil pipeline
• China’s first transnational pipeline and Kazakhstan’s first transnational pipeline to its neighbour to the east.
• The project was undertaken by the Sino-Kazakh pipeline company, a “50:50 venture
• Currently capacity is at 14 million tons per year
• Expected nominal capacity of 20 million tons per year in 2014.
• The total cost of the project has been estimated at US$3-3.5 billion; phase two of the project, initially supposed to cost around US$700 million, cost an estimated US$850 million.
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Kazakhstan-china oil pipeline
• Three sections:
Length Completed
From Keniyak to Atyrau 279 miles
2003
From Atasu to Alashankou 613 miles
2005
Kenkiyak to Kumkol -- 2009
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Kazakhstan-china oil pipeline
• Rules for pipeline access
– All potential shippers are guaranteed equal access to the pipeline when capacity is available
– CNPC and KMG have priority rights of accessing the pipeline capacity
– Pipeline capacity, first of all, will be used to fulfill the obligations under long-term oil transportation agreements
– If one of the parties does not use its pipeline capacity in full, the other party has the right to use such unused capacity
– In case transportation volumes under contracts exceed the pipeline capacity, the rights for transportation will be executed according to the shares of KMG and CNPC in the Project Company
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In reality…
• The pipeline current capacity is approximately 200,000 bpd
• 2008: China imported an average of only 115,000 bpd of crude oil from Kazakhstan by pipeline and rail.
• In December 2007, the pipeline carried an average of 102,600 bpd
• Only about half of its total capacity
• Reason: Current Kazakh production does not yet completely fill the line
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Constraints• The transport of construction vehicles, equipment, personnel
and pipes in this huge and remote region are a logistic nightmare.
• Heavy pipes must be healed over huge distances over soft sands,
• Wear and tear construction vehicles in this environment is so severe that they require monthly service and replacement
• Construction workers need to be conveyed to and from working camps and pumping stations daily
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• Insufficient diameter
• The pipeline could only be an economic success if the pipeline could deliver 20 million tons of oil annually.
• The 311 mile (approximately 500 kilometres) pipeline that existed for most of the way between Kenkiyak and Atasu had to be rebuilt.
Constraints
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conclusion• China wins
- It gains what it sees as “secure oil supplies
• Kazakhstan wins too- It gains a crude export route independent of Russia and a new market for its oil.
• Meet Kazakhstan's national security interests, and provide an outlet to meet China’s growing demand for oil.
• Downside: PRC can potentially control the price paid for the oil
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ReferenceBlinick, A. (28 March 2014). The Kazakh-China Oil Pipeline: “A Sign of the Times”. Retrieved from http://www.cctr.ust.hk/materials/working_papers/WorkigPaper22-Blinick.pdf
Collins, B. & Erickson, A. (2012). CHINA’S OIL SECURITY PIPE DREAM: The Reality, and Strategic Consequences, of Seaborne Imports. Naval War College Review, Vol. 63 (2), p89-111.
Energy Global. (28 March 2014). Kazakhstan-China oil pipeline could start operating at its full capacity by 2014. Retrieved from http://www.energyglobal.com/news/pipelines/articles/Kazakhstan_to_China_oil_pipeline_could_start_operating_at_its_full_capacity_by_2014.aspx
Hendrix, L. & Chow, E. (2010). Central Asia’s Pipelines: Field of Dreams and Reality. NBR Special Report, Vol. 23, p 66-72.
Herberg, M. (2010). Pipeline Politics In Asia: The Intersection of Demand, Energy Markets, and Supply Routes. NBR Special Report, Vol. 23, p 66-72Kazakhstan - US Energy Information Administration (EIA). (28 March 2014). Retrieved from http://www.eia.gov/countries/country-data.cfm?fips=kz
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ReferenceLee, P. (2005). China’s quest for oil security: oil (wars) in the pipeline? The Pacific Review, Vol. 18 (2), p265–301.
Nathan, J. (28 March 2014). Kazakhstan Oil Supply Chain: Despite Upstream Synergy, the Republic Faces Downstream Challenges in Global Markets. Retrieved from http://orgs.bloomu.edu/gasi/Proceedings%20PDFs/Nathan1.pdf
OGEL. (2006). The Kazakhstan-China Pipeline. Retrieved from http://www.ogel.org/article.asp?key=2329
Olcott, M. (2007). Kazmunaigazk: Kazakhstan's National Oil and Gas Company. Retrieved from http://large.stanford.edu/publications/coal/references/baker/studies/noc/docs/NOC_Kaz_Olcott.pdf
Pirani, S. (2012). Central Asian and Caspian Gas Production and the Constraints on Export. Oxford Institute for Energy Studies. Retrieved from http://www.qclub.org.ua/wp-content/uploads/2012/12/central-asian-and-caspian-gas-production-and-the-constraints-on-export.pdf
Saurbek, Z. (2008). Kazakh-Chinese Energy Relations: Economic Pragmatism or Political Cooperation? China and Eurasia Forum Quarterly, Vol. 6 (1), p79-93.