High rates of extensive growth of the Chinese economy in the coming decades can be supported only if additional sources of energy resources are found. China, which is experiencing an energy shortage, is increasingly involved in the global competition for hydrocarbon resources across the entire field of the world economy. Due to its geographical proximity, Central Asia, mainly Kazakhstan and Turkmenistan, has become a natural target for Chinese energy diplomacy efforts. Late to the primary division of the Central Asian energy pie, since the beginning of the new century, the PRC has consistently increased its presence in the energy sector of the region.

EXTENSIVE ECONOMIC GROWTH IN CHINA: GROWING DEPENDENCE ON ENERGY IMPORTS

The unprecedented high rate of economic growth of the Chinese economy over the past two or three decades is a major phenomenon of global development. In 1978-2005, the average annual growth rate of China's GDP was, according to official data, 9.5%. At the same time, the large-scale Chinese economy is characterized by great inertia and, despite the high rate of growth for several decades in a row, shows no signs of slowing down. The average annual growth rate was 9.3% in 1981-1990, 10.1% in 1991-2000, and 9.5% in 2001-2005. [calculated from: China Statistical Yearbook 2005; Statistical Communique..., 2006]. In 2007, GDP growth is expected to be in the range of 8-10%. Even if we agree with those researchers who believe that official statistics overestimate the growth rate of gross domestic product by two to three percentage points, then both the speed, stability and duration of the Chinese economic breakthrough remain impressive.

Less attention is usually paid to the fact that the Chinese economy is showing extensive economic growth, which can only be achieved by expanding the consumption of raw materials. This means that China's medium-term economic growth prospects are critically dependent on the supply of hydrocarbons, mainly and primarily oil. Natural gas currently plays a minor role in meeting the energy needs of the Chinese economy. The share of gas in the energy balance of the PRC is at the level of 3%, and consumption in 2005 was only 47 billion cubic meters, with its own production of 50 billion cubic meters. cubic meters [BP Statistical..., 2006].

This work was supported by the Russian Foundation for Natural Sciences (RGNF) in the framework of the research project "Energy Security in a globalizing world and Russia", No. 06 - 02 - 02040a.

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Table 1

Forecasts of China's economy's dependence on oil imports, %

2005 (fact.)

2010

2015

2020 y.

World Energy Outlook, International Energy

51

60

65

70

Administration US, 2005 (base case) OPEC, 2003

51

53

60

67

Institute of Energy Economics, Japan, 2005

51

45

63

-

Institute of Econometrics and Techno-Economics,

51

32 - 38

-

45 - 59

Chinese Academy of Social Sciences, 2004 Author, 2006*

51

52 - 56

-

67 - 75

-----

* Calculations are based on various hypotheses about the growth rate and prospective dynamics of specific consumption of oil and petroleum products per unit of GDP.

Источники: BP Statistical..., 2006; China's Crude Oil..., 2005; International Energy..., 2005; Ito, Zhidong, Komiyama, 2005; Shihab-Eldin, Hamel, Brennand, 2004.

In 1980-2005, China's oil consumption increased 3.7 times to 327 million tons, of which 167 million tons were imported. Over the same period, the share of imports in the so-called visible oil consumption (=domestic production + import - export) increased from 0.9% to 51%. If in 1990 the PRC was still a net oil exporter, then in 2003 it was not. it became the world's third-largest importer after the United States and Japan.

According to the available forecasts, the main results of which are summarized in Table 1, in 2010 imports will cover from 52 to 60% of China's oil needs. The forecasts of the parastate Institute of Econometrics and Technoeconomics of the Chinese Academy of Sciences, as well as the Institute of Energy of Japan, are obviously underestimated. If GDP continues to grow at a high rate, imports will account for about 70% of China's oil needs by 2020.

In absolute terms, the demand for oil in the PRC in 2010 will be 296-458 million tons, and imports in the maximum version may reach 275 million tons. If we rely on average forecast indicators that exclude the maximum and minimum limit options, then in order to maintain high economic dynamics of the PRC in 2010, it is necessary to import 166-200 million tons of oil That is 5.4 times the actual level of 2005. By 2020, to maintain high GDP growth rates, China will have to import at least 300-400 million tons of oil.

It is not surprising that meeting the growing demand for oil imports has imperatively moved to the center of China's foreign policy. China, which is experiencing an energy shortage, is rapidly expanding its presence both in traditional hydrocarbon producers (the Middle East and North Africa) and in new areas of the global energy market, including West Africa and the former Soviet Union. Russia, Kazakhstan, Turkmenistan and to some extent Uzbekistan are considered by China, as well as all other major oil importers, as potential sources of energy resources. Since 2000, the supply of Eurasian oil to China has started to grow slowly. In 2002, the share of the former USSR in China's apparent oil consumption was 3.2%, in 2003 - 4.3%, and in 2004 - 10.7%. According to some forecasts, by 2025, OPEC countries will provide 66% of Chinese oil imports, and the former USSR-about 20% [Reznikova, 2005, pp. 80-81].

A special place among the new energy partners of the PRC is occupied by the hydrocarbon-rich countries of Central Asia. On the one hand, this sub-region is geographically close to the PRC, and the most oil-rich Central Asian state

page 90

It shares a common border with China. On the other hand, Central Asian oil and gas exporters are actively looking for new markets. Between 1990 and 2005, oil production in this sub - region more than doubled and approached 80 million tons. Its share in world oil production increased from 1.1% to 2% over the same years. Approximately four-fifths of Central Asian oil is produced in Kazakhstan (see Table 2).

The collapse of the former Soviet economy, further spurred by standard Bretton Woods Institution-style macroeconomic stabilization programs, has dramatically suppressed domestic demand, including for energy resources. The relatively rapid growth of oil production observed in Kazakhstan since 1999 is accompanied by an even faster increase in its exports. More than 90% of all Kazakhstan's oil is exported.

Over the past 15 years, natural gas production in Central Asia has grown more slowly than in the world as a whole. Accordingly, the sub-region's share in global gas production decreased from 6.3% in 1990 to 5.0% in 2005 (see Table 2). This dynamic is explained by the fact that Turkmenistan sharply reduced gas supplies to the insolvent post-Soviet states, which in the past received gas at literally bargain prices. At the same time, Turkmenistan has been slowly restoring gas production and export since 1999. Against this background, gas production in Uzbekistan shows a fundamentally different dynamic. In contrast to Turkmenistan, gas production in Uzbekistan in 1990-2005 not only did not decrease, but, on the contrary, grew 1.5 times, reaching 56 billion cubic meters at the end of the indicated period.However, the vast majority of gas produced in Uzbekistan is intended for domestic consumption, and exports do not exceed one - fifth of total production.

These and other circumstances are targeting the PRC, at least at the moment, for Kazakh oil and Turkmen gas. In a situation of increasing competition for hydrocarbon resources around the world, China's energy interests in Central Asia overlap with the interests of other global players in the global market. The struggle of the Russian and British empires for dominance in Central Asia in the 19th century is metaphorically referred to as the "Big Game"in the history of diplomacy. Using this metaphor, it can be argued that the "Oil and Gas Game" is unfolding in modern Central Asia, which is one of the private plots of the global "Energy Game".

CHINA AND KAZAKHSTAN'S OIL

In the mid-1990s. Kazakhstan has been selling off its hydrocarbon deposits at unprecedented cheap prices and on favorable terms for foreign capital. The largest and most attractive assets of the country were controlled by American and, to a lesser extent, European multinational corporations. However, some deposits have also come under the control of the PRC. The largest asset of the China National Petroleum Corporation (CNPC) in Kazakhstan, acquired during the privatization campaign in 1996, was the Kenkiyak and Zhanazhol fields with residual recoverable oil reserves of 106 million tons (Butyrina, 2003). In 2005, the CNPC-Aktobemunaigas oil producer, in which CNPC controls an 85.3% stake, produced 5.83 million tons of oil, which is approximately 8% of total oil production in Kazakhstan. Gas production amounted to 2.73 billion cubic meters. m. In 1996-2005, oil production at this enterprise increased 2.2 times (Figure 1). It is expected that in 2006 oil production here will exceed 6 million tons, and by 2008-2010 it will reach the level of 8-10 million tons.

In August 2005, KNOC acquired a second relatively large oil asset in Kazakhstan, buying it for US$ 4.18 billion. The Canadian oil company PetroKazakhstan [Ng, Wing-Gar, 2005; Rebrov, 2005], which is the third largest oil company in the world.-

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Table 2

Oil and gas production in Central Asia and the Caspian region1

Country / Region

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Oil production, mln tons, including gas condensate

Kazakhstan

25.8

26.6

25.8

23.0

20.3

20.6

23.0

25.8

25.9

30.1

35.3

40.1

48.2

52.4

60.6

63.0

Turkmenistan

5.7

5.4

5.2

4.4

4.2

4.1

4.4

5.4

6.4

7.1

7.2

8.0

9.0

10.0

9.6

9.5

Uzbekistan

2.8

2.8

3.3

4.0

5.5

7.6

7.6

7.9

8.2

8.1

7.5

7.2

7.2

7.1

6.6

5.5

Central Asia - 3

34.3

34.8

34.3

31.4

30.0

32.3

34.9

39.0

40.5

45.3

50.0

55.3

64.4

69.6

76.8

78.0

Azerbaijan

12.5

11.7

11.1

10.3

9.6

9.2

9.1

9.2

11.4

13.8

14.0

14.9

15.4

15.5

15.7

22.4

Caspian countries - 4

46.8

46.5

45.4

41.7

39.6

41.5

44.0

48.2

51.9

59.1

64.0

70.2

79.8

85.1

92.5

100.4

Share of global oil production, %

Central Asia - 3

1.1

1.1

1.1

1.0

0.9

1.0

1.0

1.1

1.1

1.3

1.4

1.5

1.8

1.9

2.0

2.0

Caspian countries - 4

1.5

1.5

1.4

1.3

1.2

1.3

1.3

1.4

1.5

1.7

1.8

2.0

2.2

2.3

2.4

2.6

Kazakhstan

0.8

0.8

0.8

0.7

0.6

0.6

0.7

0.7

0.7

0.9

1.0

1.1

1.3

1.4

1.6

1.6

Natural gas production, billion cubic meters 2

Kazakhstan

6.6

7.4

7.6

6.2

4.2

5.5

6.1

7.6

7.4

9.3

10.8

10.8

10.6

12.9

20.6

23.5

Turkmenistan

81.9

78.6

56.1

60.9

33.3

30.1

32.8

16.1

12.4

21.3

43.8

47.9

49.9

55.1

54.6

58.8

Uzbekistan

38.1

39.1

39.9

42

44

45.3

45.7

47.8

51.1

51.9

52.6

53.5

53.8

53.6

55.8

55.7

Central Asia - 3

126.6

125.1

103.6

109.1

81.5

80.9

84.6

71.5

70.9

82.5

107.2

112.2

114.3

121.6

131.0

138.0

Azerbaijan

9.2

8

7.4

6.3

6

6.2

5.9

5.6

5.2

5.6

5.3

5.2

4.8

4.8

4.7

5.3

Caspian countries - 4

135.8

133.1

111

115.4

87.5

87.1

90.5

77.1

76.1

88.1

112.5

117.4

119.1

126.4

135.7

143.3

Share in global gas production, %

Central Asia - 3

6.3

6.2

5.1

5.2

3.9

3.8

3.8

3.2

3.1

3.5

4.4

4.5

4.5

4.6

4.8

5.0

Caspian countries - 4

6.8

6.5

5.4

5.5

4.2

4.1

4.0

3.4

3.3

3.7

4.6

4.7

4.7

4.8

5.0

5.2

Turkmenistan

4.1

3.9

2.7

2.9

1.6

1.4

1.5

0.7

0.5

0.9

1.8

1.9

2.0

2.1

2.0

2.1

Uzbekistan

1.9

1.9

2.0

2.0

2.1

2.1

2.0

2.1

2.2

2.2

2.2

2.1

2.1

2.0

2.1

2.0

Notes:

1 Central Asia - 3: Kazakhstan, Turkmenistan, Uzbekistan; Caspian countries-4: Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan.

2 To ensure international comparability of data, data on gas production in the Caspian republics are based on British Petroleum's global reports. They may differ slightly from national statistics, mainly due to differences in the calculation methodology.

Compiled and calculated by: BP Statistical Review of World Energy for different years; national statistics data.

page 92

Chart 1

CNPC-Aktobemunaigas oil production, mln tons, 1996-2006

* 2006-preliminary assessment.

the largest producer of oil in Kazakhstan after the joint venture of Tengizchevroil and the national oil company Kazmunaygas. In 2005, PetroKazakhstan produced 5.51 million tons of oil. Total proven reserves controlled by the company are estimated at 53.5 million tons of oil equivalent. Taking into account other, smaller deposits that are partially controlled by KNNK in the framework of joint ventures, in 2005 it produced approximately 15-16 million tons of oil in Kazakhstan and controlled its reserves of approximately 200 million tons With an annual production of 15-20 million tons, these reserves will last for 10-13 years of operation. At the same time, one of the three refineries in Kazakhstan, Shymkent Oil and Gas Syntez, which annually processes about 4 million tons of oil, was under the control of CNPC.

Thus, in 2005, approximately 25-30% of the oil produced in Kazakhstan was accounted for by enterprises wholly or partially controlled by CNPC. Kazmunaygas, the state-owned company of Kazakhstan, accounted for only 9.3 million tons, or 15% of total production. Even taking into account the oil produced by subsidiaries of Kazmunaygas and the so-called profit oil received by the state monopoly from foreign companies, the latter's share in total production was about 25%. The remaining 45-50% of production was provided by Western companies and the Russian LUKoil.

In the fall of 2006, the Chinese state-owned investment fund CITIC announced its intention to buy US$1.9 billion. assets of the Canadian company Nations Energy. The main asset of the latter in Kazakhstan is the Karazhanbasmunai field, whose recoverable reserves are estimated at 46.6 million tons of oil equivalent. In 2005, the field produced 2.24 million tons of oil (Skorlygina, 2006). If the deal goes through, Chinese companies will account for up to 40% of the oil produced in Kazakhstan. However, this deal may be blocked by the government of the country, if the latter considers it necessary to increase the share of the state holding company Kazmunaygas in the total volume of oil produced in the country. In addition, other companies, including Russian ones, claim the assets of Nations Energy [Uspensky, 2006].

It would seem that the proportions of the distribution of current oil production indicate the growing dominance of China in the oil sector of Kazakhstan. However, when moving from production levels to the country structure of controlled reserves, the situation looks somewhat different. It turns out that the share of China in the total oil reserves of the 12 largest Kazakh deposits on land is only 4%

page 93

Table 3

Shares of investor countries in Kazakhstan's oil fields*

12 largest onshore deposits in Kazakhstan

Kazakhstan's 12 largest onshore fields and Kashagan

USA

35%

USA

30%

Kazakhstan

30%

Kazakhstan

18%

Great Britain

4%

Great Britain

9%

Italy

4%

Italy

9%

Canada

4%

Netherlands/Great Britain

7%

Russia

4%

France

7%

China

4%

Japan

3%

Others

15%

Canada

3%

China

3%

Russia

2%

Others

9%

-----

* Shares are calculated based on the country affiliation of energy companies.

Source: [Reznikova, 2003, p. 120].

(Table 3). However, these estimated data refer to the beginning of 2003 and are somewhat outdated. As of mid-2006, we estimate that China's share was about 8-10%. Taking into account the reserves of the Kashagan group of fields, the share of reserves controlled by the PRC is in the range of 6-7%.

In other Central Asian countries, China's presence in the oil and gas sector is noticeably more modest.1 In principle, this is not surprising. The other two Central Asian oil producers, Turkmenistan and Uzbekistan, collectively produce about 15 million tons of oil per year (see Table 2). At the same time, oil production in Turkmenistan has stabilized around 10 million tons, and Uzbekistan is experiencing an acute production crisis. In the first years of independence, following the Soviet-style energy security strategy, Uzbekistan almost tripled its oil production to about 8 million tons. However, since 1999, oil production in this country began to decline consistently, and in 2004-2005 this decline took on a landslide character (see Table. 2 and diagr. 2).

Despite numerous official statements and declarations, China's modest presence in the Eurasian oil industry is explained by the fact that CNPC was not among the leading players in the global oil market until recently. Its financial capabilities are constantly growing, but at the moment it is unlikely to be able to implement technologically complex projects. Despite the fact that in the Caspian region, mainly in Kazakhstan, the vast majority of production growth is expected in the offshore zone, KNOC has no experience of working on the shelf. It is no coincidence that all projects with Chinese participation in Central Asia involve relatively small deposits with long service lives, in the rehabilitation of which Chinese companies have accumulated considerable experience.

The situation can change fundamentally only if the PRC makes a strategic decision to diversify its oil imports by increasing the supply of hydrocarbons from the Caspian region, and Chinese corporations can establish control over large deposits on the Caspian shelf. Theoretically, in order to turn into a serious independent player

1 For details on the participation of Chinese companies in the oil and gas sector of Kyrgyzstan, Turkmenistan, and Uzbekistan, see [Zhukov, 2006, pp. 111-113].

page 94

Chart 2

Dynamics of oil production in Uzbekistan and Turkmenistan in 1990-2006, mln tons

* 2006-preliminary assessment.

in the Caspian Sea, China would need multibillion-dollar investments in the development of large local deposits. Until very recently, it seemed that such an arrangement of the necessary financial resources, coupled with the lack of sufficient experience in the development of offshore fields, made a Chinese breakthrough in the oil sector of Kazakhstan unlikely. However, it is possible that high prices for hydrocarbons and the intensification of global competition for oil and gas assets have pushed China to step up its energy policy. According to Kazakhstani researchers, already in 2003, the Chinese authorities changed their priorities in their energy policy, putting security considerations above economic expediency [Laumulin and Syroezhkin, 2005, p. 65]. This has also affected the actions of the CNPC in Central Asia, primarily in Kazakhstan.

There is a rational grain in this assessment, but, in our opinion, the increased participation of the PRC is determined by the fact that world oil prices, apparently, have reached a new, higher level for a long time, which seriously changes the economy of large-scale energy projects, significantly increasing the efficiency of oil transportation over long distances. In the mid - to second half of the 1990s, world oil prices were at a very low level, and detailed calculations showed that it was simply unprofitable for China to import oil from Kazakhstan due to relatively high transport costs (Soligo and Jaffe, 1998). With higher oil prices, the negative impact of relatively high transport costs is virtually eliminated. It is also affected by the fact that China directly borders on Kazakhstan and represents for the latter a natural market for the export of crude oil, and in this case there are no risks due to the transit of raw materials through the territories of third countries.

There is no doubt that political factors involved also played a role. The change in China's position was influenced by the military intervention in Iraq, which highlighted the instability in the Middle East region, which is the most important source of China's oil imports, as well as the situation around the Russian company YUKOS, as a result of which hopes for the construction of the Russian-Chinese oil pipeline to Daqing were actually buried. For its part, Kazakhstan has also made a sharp rapprochement with China in the energy sector. This was prompted by periodic attempts by the United States to play the Kazakhgate card in the interests of American energy companies, Russia's intransigence in the transit of Kazakh oil and prices for imported Kazakh gas, and the desire to achieve more favorable conditions for connecting to the Baku-Tbilisi-Ceyhan oil pipeline.

page 95

The intensification of Chinese-Kazakh energy cooperation was primarily reflected in the acceleration of the construction of an oil pipeline from Kazakhstan to the Xinjiang Uygur Autonomous Region (XUAR) in the west of China. Back in 1997, China and Kazakhstan signed a general agreement on the construction of an oil pipeline along the Atyrau-Kenkiyak-Kumkol-Atasu-Druzhba route and further to China. The pipeline's capacity was estimated at 20 million tons of oil per year, and the estimated cost of its construction was US $ 2.7-3.5 billion. The Chinese government has agreed to cover a significant portion of the costs. However, this project was frozen for several years.

The Atasu (Kazakhstan) - Alashankou (Xinjiang Uygur Autonomous Region, China) oil pipeline was built only in December 2005. Crude oil deliveries via the pipeline from Kazakhstan to China began in spring 2006. This is the first Kazakhstan oil pipeline that does not pass through the territory of third countries and connects local oil fields with foreign consumers directly. However, for the PRC, this is the first imported oil pipeline that has passed overland. The construction cost of the 962 km long pipeline with an annual capacity of 10 million tons was US $ 806 million. The commercial operator of the project is the China National Petroleum Company. It is assumed that by 2007, up to 10 million tons of oil can be delivered from Kazakhstan to China for processing at oil refineries in Xinjiang (Bakhtigareev, 2004).

At the same time, China is accelerating the construction of the Kenkiyak-Kumkol oil pipeline, which will increase the capacity of the pipeline to China to 20 million tons per year by 2012. In the future, due to the connection of oil produced in the Kazakh section of the Caspian shelf, the total capacity of the pipeline to China may reach 50 million tons per year.

It is also impossible to discount the scenario in which oil from Kazakhstan's fields will be supplied to China by American and European and/or Russian corporations. Integration of Central Asia and the Caucasus into the international division of labor and processes of global communication takes place in the context of globalization, which creates a new paradigm of competition and cooperation. Competition for Caspian resources can lead to the formation of the most unexpected strategic alliances of multinational corporations and nation states.

Trying to attract Russian oil to the Atasu-Alashankou pipeline, Kazakhstan guaranteed Russian companies unhindered access to the pipeline [Kazakhstan guarantees..., 2006]. The Kazakhstan-China oil pipeline is technologically connected to the former Soviet trunk pipeline system and can be connected to the Omsk (Russia) - Pavlodar (Kazakhstan) - Chimkent (Kazakhstan) - Turkmenabad (Turkmenistan) route. CNPC, which is responsible for filling the Kazakh-Chinese oil pipeline, expects to fill it at the expense of Russian oil from Siberian fields. The Russian oil company Gazprom Neft (formerly Sibneft) has been exporting raw materials to China for several years, delivering oil from Omsk to Atasa and then by rail. Given that oil transportation tariffs via pipelines are significantly lower compared to even preferential railway tariffs, there is a high probability that Russian companies will start exporting oil to China via the new pipeline.

The latter option is especially likely in the first years of operation of the Kazakh-Chinese oil pipeline. Not only does CNPC produce not so much oil in Kazakhstan, but it is also bound by obligations to provide raw materials to Shymkent Oil and Gas Synthesis and some other export contracts. At the end of 2006, Kazakhstan allocated a quota of up to 6 million tons to Russian companies and TNK-BP in the Atasu-Alashankou pipeline.

page 96

from Russian fields, it can occupy up to 60% of the pipeline's capacity (Kolesnikova and Podobedova, 2006).

CHINA AND TURKMEN GAS

At the beginning of this century, China also joined the ongoing "Gas Game"in Central Asia. Initially, the main partner of the PRC in the gas sector was Kazakhstan, which plans to significantly increase gas production in the next decade and may also expand the transit of Turkmen and Uzbek gas through its territory. China's efforts to expand gas cooperation with Central Asia were particularly intensified after the launch of the main gas pipeline connecting Xinjiang with Shanghai. In September 2004, a gas pipeline connecting the western and eastern provinces was put into operation in China. The pipeline is 4,000 km long and has a capacity of 12 million cubic meters. m per year passes through the territory of 10 provinces. The reserves of raw materials available in the SU AR make it possible to load the gas pipeline for 30 years [China proposals..., 2005].

Technologically, it is quite easy to connect Central Asian gas to this pipeline, so the economic attractiveness of participating in gas projects in the sub-region for the PRC has increased many times. Moreover, in the near future, if the Chinese economy maintains high growth rates, it is possible to build a second West-East gas pipeline that will connect XUAR with the capital of Guangdong Province Guangzhou. The expected capacity of the gas pipeline is 26 billion cubic meters (China plans..., 2005). It is logical to assume that the construction of the second trans-Chinese gas pipeline will run in parallel with the construction of gas pipelines not only from Kazakhstan, but also from Russia and Turkmenistan.

In 2004, China resumed negotiations with Kazakhstan on the possible construction of a gas pipeline to China. The parties set up a joint commission to discuss prospects for cooperation in the gas sector, and Kazmunaygas announced its intention to supply up to 10 billion cubic meters of blue fuel to China in 2008 and up to 30 billion cubic meters by 2020. Gas is planned to be supplied from the Karachaganak, Tengiz and Kashagan fields [Kazakhstan with construction..., 2005]. At the same time, however, it should be borne in mind that Chinese plans to build a gas pipeline from Kazakhstan are not supported by the resource base. As noted above, CNPC produced less than 3 billion cubic meters of gas in 2005. The main increase in gas production in Kazakhstan is expected at the Karachaganak and Tengiz fields. Karachaganak is expected to receive up to 15 billion cubic meters of conditioned dry gas per year, and all this gas will be produced at a joint Kazakh-Russian enterprise, which should be established on the basis of the Orenburg Gas Chemical Combine and then go to the Gazprom export system [Pyatiletka..., 2005, pp. 32-33]. By 2010, the Tengizchevroil joint venture will probably produce up to 14 billion cubic meters. m of gas, of which only 9 billion cubic meters can be exported. The development of the Kashagan group of fields has once again been postponed until 2009/2010.

Some commentators believe that Kazakhstan deliberately involved the Chinese side in the discussion of regional gas projects, hoping thereby to achieve certain concessions from Russia [Butyrina, 2005]. The fact is that currently all Kazakhstan's gas exports go through the gas transportation infrastructure of the Russian Gazprom. The Kazakh mining company is forced to sell gas to Gazprom's subsidiaries, which are engaged in its further sale, including in the markets of third countries. Kazakhstan, like Turkmenistan, has been pushing Gazprom to raise prices for its natural gas for several years.

page 97

However, the version about the use of the Chinese trump card in the Kazakh-Russian game, even if it has some grounds, is obviously not complete. Rather, it is necessary to say that China, which is in dire need of energy resources, is masterfully playing out its own alignment, encouraging competition between post-Soviet hydrocarbon exporters in every possible way. It is not necessary to transport gas produced in Kazakhstan through the Kazakhstan-China gas pipeline. This gas pipeline can become a link in a large-scale Central Asian gas infrastructure aimed at the Chinese market. In April 2006, the general agreement on gas cooperation between China and Turkmenistan was signed. According to the agreement, the PRC has committed to purchase 30 billion cubic meters of natural gas from Turkmenistan for 30 years at prices pegged to world market prices. The Turkmenistan-China gas pipeline is planned to be built by 2009 to deliver Turkmen gas [Turkmen Gas..., 2006]. At the same time, China opened a soft loan of US$25 million to Turkmenistan for a period of 25 years with an interest rate of 3%, which will be used to purchase Chinese-made drilling rigs for the development of the Amu Darya gas fields (Tursunbayev, 2006).

The right bank of the Amu Darya is considered one of the most promising regions in terms of gas deposits. According to the estimates of Exxon (USA) and OMV (Austria), the total projected resources here may amount to 1.3 - 1.76 trillion cubic meters of gas and 750 million tons of liquid hydrocarbons [To China will go..., 2006]. Previously, Turkmenistan did not allow foreign companies to develop onshore gas fields. Foreign investors could only rely on the development of offshore fields in the Caspian Sea.

Another interesting point of the Turkmen-Chinese gas agreement is that the PRC will pay for Turkmen gas at the border of Turkmenistan. At the same time, this gas can only reach China through the territory of third countries; the PRC, as follows from Article 5 of the agreement, has undertaken to agree on the transit of Turkmen gas through the territory of the latter [Turkmen Gas..., 2006]. China's confidence that it will be able to settle the construction of the gas pipeline and organize the transit of Turkmen gas through the territory of Uzbekistan and Kazakhstan indicates that China has fully mastered post-Soviet Central Asia as a leading player.

It is obvious that China expects to link the Kazakh and Turkmen gas pipelines together. In the future, it is also possible to connect Uzbek gas fields to the Central Asia-China gas pipeline system. In addition, the deepening China-Central Asian gas cooperation is an excellent tool for China to put pressure on Russia. In March, the PRC reached an agreement in principle with the latter on the construction of two gas pipelines. The western and eastern gas pipelines, with a capacity of up to 30 billion cubic meters each, are designed to supply gas to the western and eastern provinces of China. At the same time, the western gas pipeline is planned to be built in the direction of Xinjiang [Gazprom and CNPC..., 2006].

The emergence of a Chinese alternative to Gazprom fully meets the interests of Turkmenistan (as well as other Central Asian gas exporters), as it strengthens its position in relations with Russian Gazprom. Moreover, many commentators point out that Turkmenistan's entry into the Chinese gas market will result in serious problems for Gazprom, since the latter, when concluding long-term contracts on the European market, assumed that it would receive the entire volume of gas exported by Turkmenistan [Grib and Sidorenko, 2006].

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In November 2006, Turkmenistan gave permission to CNPC to participate in the development of the South Yolotan gas field. The reserves of the field are estimated at 7 trillion cubic meters. m. According to the order of the former president of Turkmenistan, the state concern Turkmengeologiya was to conclude three-year contracts with the Changqing Oil Exploration Department (one of the divisions of the CNPC) for drilling 12 gas wells with a depth of up to 5 thousand meters in the South Yolotan field. The contract value is set at US$152 million. [Uspensky, 2006]. The official estimate of South Yolotan's reserves at 7 trillion cubic meters has not been confirmed by an international audit. If it turns out to be correct, then the Turkmen field is almost twice as large as the giant Shtokman field. This deal is a serious signal of the upcoming large-scale breakthrough of China to the gas resources of Central Asia.

In principle, not only Chinese companies can connect to the planned Central Asia-China gas pipeline. In 2005, the Malaysian company Petronas was granted the right to directly export natural gas from Turkmenistan, which also indicates significant changes in the energy policy of the Turkmen leadership. Since 1996, Petronas has been developing three oil and gas fields on the Turkmen shelf of the Caspian Sea on a production-sharing basis, with total recoverable reserves estimated at 545 billion cubic meters. In June 2006, Petronas reached an agreement with the state-owned company Kaztransgas to transport gas from Turkmenistan through the Kazakhstan gas pipeline system. At the same time, the Government of Turkmenistan allowed Petronas to build connecting gas pipelines from offshore fields to the Central Asia-Center main gas pipeline. Along with this, the Malaysian company received the right to independently find a buyer for the exported gas. Exports in the amount of 2.5 billion rubles. It is planned to start production in 2008. By 2010, export volumes will reach 10 billion cubic meters. m per year. At this level, exports are expected to be maintained until 2020.

the prospects

Thus, objective energy complementarity opens up broad prospects for cooperation between China and Central Asia in the oil and gas sectors. Belatedly, China actively joined the global competition for oil and gas resources in the Central Asian region and managed to achieve significant success in this struggle.

Until now, the main oil flows from Central Asia go in a westerly direction. Nevertheless, in the next one or two decades, we can expect an increase in the supply of Central Asian, mainly Kazakh, oil to the east. The fact is that taken as a whole, the European oil market is quite saturated and is not able to digest significant additional volumes of new oil. According to available forecasts, oil demand in developed European economies will grow at a sluggish pace in the coming years (figure 3). The situation in China is fundamentally different. The demand for oil here will grow rapidly. By 2011, the volume of oil consumption in China will reach 60% of the level of European countries-members of the Organization for Economic Cooperation and Development.

However, it should be borne in mind that oil production is expected to decline in the North Sea fields in the next decade. There is a fierce competition for the vacant niche. Western, mainly American, companies producing oil in Azerbaijan and Kazakhstan, as well as Russian companies, are trying to fill this niche. Given the increasingly competitive struggle of these players, it is all the more profitable for Kazakhstan to have export routes to Vietnam-

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Figure 3

Forecast of oil demand in China and European OECD member countries

in the waste water direction. As global competition will only escalate, not only importers of hydrocarbons are interested in diversifying their supplies, but also producers of the latter need to diversify their export markets.

This is also fully true for natural gas. At the same time, the global competition for Central Asian gas is likely to be particularly acute. Unlike oil, gas demand in the European market will grow rapidly. Central Asian gas also plays an important role in Russia's Gazprom portfolio.

To a large extent, China's chances of becoming a truly major player in the Central Asian "oil and gas game" are determined by the pace of liberalization of domestic energy prices. Despite the gradual pull-up to the conditional global average levels, these prices continue to remain below the latter. Among other things, this means that the growth of hydrocarbon imports to China implies an increase in centralized subsidies to oil and gas consumers. In the case of full price liberalization, it is possible that the current GDP growth rate will decrease and China's needs for oil and gas imports will ultimately be significantly lower than the current forecast estimates.

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