Turkmenistan starts selling gas to China

Turkmenistan has started to sell gas to China through the world’s longest natural gas pipeline as it continues to develop an international export market for its vast energy reserves.

The 8,700km pipeline became operational last month after Turkmenistan agreed to supply Beijing with up to 40 billion cubic meters of gas annually, about half its production.

The $22 billion pipeline is the second link between the two countries and should deliver 30 billion cubic meters of gas to China every year.

“There will be a fourth or even fifth gas pipeline in the future”, said Liao Yongyuan, vice president of China’s National Petroleum Corporation to the Xinhua news agency.

China estimates that its current national gas demand of 130 billion cubic meters will increase to 230 billion cubic meters in 2015, and Beijing is increasingly looking towards central Asia to secure its long-term energy needs.

In April, China provided a $4.1bn loan to Turkmengaz, Turkmenistan’s state gas producer, to speed the development of South Yolotan, one of the most remote gas fields in the world. Discovered in 2006, South Yolotan contains at least 20 trillion cubic meters of gas, making it one of the largest fields ever found.

Experts also estimate that over a quarter of Turkmenistan’s gas reserves are in offshore deposits in the Caspian Sea. Last week, the country’s national media reported the start of commercial production along the Turkmen shelf of the Caspian. The gas will be produced by Petronas, the Malaysian energy company, who were one of the first foreign businesses to venture in to the central Asian state after the fall of the Soviet Union 20 years ago.

China may have broken the Russian monopoly over Turkmen energy, but Soviet infrastructure in the central Asian republic means that Moscow will continue to remain a significant buyer. Last month, Itera, the only Russian company working on Turkmenistan’s Caspian shelf, announced it will carry out exploratory drilling in a $6 billion plan to produce oil and gas from 2012.