China asserts clout in Central Asia with huge Turkmen gas project

GALKYNYSH GAS FIELD, Turkmenistan (Reuters) - China’s President Xi Jinping helped inaugurate the world’s second-largest gas field in Turkmenistan on Wednesday, showing Beijing’s growing clout in Central Asia as it seeks resources for the Chinese economy.

An aerial view shows artificial islands on Kashagan offshore oil field in the Caspian sea, western Kazakhstan, April 7, 2013. REUTERS/Anatoly Ustinenko

The start of production from the Galkynysh field was also a major development for Turkmenistan, the world’s fourth-largest holder of gas reserves, which seeks new export routes for the fuel to minimize its dependence on pipelines to Russia, which resells the gas.

Xi and his Turkmen counterpart, Kurbanguly Berdymukhamedov, simultaneously pressed two symbolic start buttons - two globes the size of basketballs decorated with national flags - to ignite flares at a gas processing plant that towered over the surrounding landscape of sun-baked desert and sand dunes.

“Galkynysh is an example of our sincere willingness to cooperate in this sphere ... This meets our interests,” Xi said at a ceremony in a hangar about 500 km (313 miles) east of the capital, Ashgabat.

China has fast supplanted Russia as the main importer of gas from Turkmenistan, Central Asia’s top producer, taking 20 billion cubic meters (bcm) last year via a pipeline commissioned in late 2009, Turkmen official data show.

Turkmen gas exports to Russia, meanwhile, have shrunk by three quarters to 10 bcm a year in the past few years. It also sells small amounts to Iran next door.

Including Galkynysh, Turkmen gas exports to China are expected to reach 65 bcm by 2020.

On Tuesday, Xi secured more Turkmen gas for China, the world’s largest energy consumer, when he and Berdymukhamedov oversaw the signing of a package of energy deals.

Galkynysh, which means “Renaissance” in Turkmen and holds an estimated 13.1 trillion to 21.2 trillion cubic meters of gas reserves, will supply an additional 25 bcm a year to China by 2020 on top of existing contracts to increase shipments by 20 bcm in coming years.

A new branch of the pipeline will be built in 2016 to transport gas from Galkynysh to China and will run via Central Asian neighbors Uzbekistan, Tajikistan and Kyrgyzstan, official media reported, quoting one of the documents signed on Tuesday.

Initial shipments via this new pipeline, officially tagged “Line D”, will total 5 bcm and will increase by a further 5 bcm a year to reach 25 bcm in 2020, a Turkmen official told Reuters.

China National Petroleum Corp (CNPC), the parent of oil and gas producer PetroChina 0857.HK, will be the sole service contractor implementing the second phase of development at Galkynysh.

In line with the deals inked on Tuesday, CNPC is to build facilities at the field that would process 30 bcm of gas a year, with Beijing providing the financing. The time frame and the size of the financing have not been disclosed.

The first stage that was launched on Wednesday, also for 30 bcm, was carried out by contractors from China, South Korea and the United Arab Emirates at a cost of $9.7 billion.

Writing by Dmitry Solovyov; editing by Jane Baird