Oil Report

Kazakhstan, China agree to press ahead with pipeline

ALMATY, Nov 8 (Reuters) - China and Kazakhstan agreed to press ahead with plans to construct a natural gas pipeline in 2008-2009 that would give Beijing access to Caspian Sea gas reserves, the Kazakh state energy company said on Thursday.

KazMunaiGas [KMG.UL] said in a statement it had signed an agreement with China National Petroleum Corp. (CNPC) setting out principles of future work on the pipeline, which would annually pump 40 billion cubic metres of gas.

“This project would help transport gas to China and diversify Kazakhstan’s gas export routes,” KazMunaiGas said.

Currently Central Asia's top gas producers, Kazakhstan and Turkmenistan, use a pipeline network operated by Russian gas monopoly Gazprom GAZP.MM to sell their gas internationally.

Energy-hungry China sees the new gas pipeline, as well as a separate oil pipeline linking it with Kazakhstan, as a step towards entrenching itself in Central Asia where most exports are now channelled west to Europe.

The statement did not say how much the pipeline would cost.

It said the sides would set up a 50-50 operator to build and maintain the pipeline, due to be constructed in two stages.

Kazakhstan and China agreed in August to route the gas pipeline from Turkmenistan through Kazakh territory. The pipeline is also expected to go through neighbouring Uzbekistan.

The first stage of the Kazakh part of the pipeline would connect Kazakhstan’s Uzbek border with China, and the second one would separately help link Kazakh gas to the trunk pipeline. (Writing by Maria Golovnina, editing by Anthony Barker)