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CNPC signs US$1.5b gas contract with Turkmenistan

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-05-16 14:27

China National Petroleum Corp (CNPC), one of China's biggest oil and gas producers, announced yesterday that it has signed a contract with Turkmenistan on natural gas exploration, reports Beijing Business Today.

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Turkmenistan will pay US$151 million to CNPC to drill 12 exploration wells at the Gunorta Eloten field over three years, according to the contract.

The Gunorta Eloten field is the world's largest gas field in terms of proven reserves.

CNPC has prepared for the project since 2000 and it has cooperated with Turkmenistan in other oil well restoration and drilling projects.

"China and Russia are racing to secure their own energy reserves," said Han Xiaoping, an energy expert. "In addition to oil, gas is the most important target for energy reserve, and China has lagged behind Russia to enter Turkmenistan. But the contract can ensure China's energy share in the country."

China and Turkmenistan entered an agreement on gas exploration in April 2006, when Turkmenistan President Saparmurat Niyazov visited China.

According to the agreement, the Central Asian state has agreed to provide 30 billion cubic meters of gas annually to China for 30 years. Gas produced in Turkmenistan will likely be used to fill a new pipeline passing through Uzbekistan and Kazakstan, which China and Turkmenistan have agreed to build by 2009.

In 2003, Turkmenistan and Russia signed a 25-year "gradual increase" contract with state-controlled Russian gas company Gazprom under which Russia's purchases of Turkmenistan gas will rise from roughly seven billion cubic meters in 2005 to 70 billion-80 billion cubic meters in 2008.

Energy experts said the cooperation between China and Turkmenistan will not affect the cooperation between Russia and Turkmenistan on gas.

"China's energy strategies in Central Asia countries are at their initial stages. In the future, China will take part in more gas exploration projects in the country," Han said.

An expert added if Turkmenistan can't supply sufficient gas to meet both China and Russia's demands, the two countries would jostle for more energy in the country.

Xu Xiaotian, another energy expert, pointed out Turkmenistan has enough natural gas to satisfy both China's and Russia's needs, so there will not be any competition between the two countries.

An analyst in a Russian investment company said the contract between Russia and Turkmenistan had been finalized, confirming there will no competition over energy.