Kazakhstan and China Negotiating Gas Export Increase

Kazakhstan intends to increase gas exports to China to maintain its market position along with Russia and Turkmenistan. QazaqGaz even plans to lay an additional gas pipeline to increase supplies, Orda.kz reports.

As BNN Bloomberg writes, Kazakhstan and China are negotiating to increase gas exports. Russia and Turkmenistan are the lead suppliers in the Chinese gas market. Russia has significantly increased gas supplies to China after the war in Ukraine began, as Moscow has lost its traditional pipeline routes to Europe. Kazakhstan seeks to become an alternative supplier for China.

Sanzhar Zharkeshov, Chair of the Board of JSC NC QazaqGaz, has stated that the demand for gas in China continues to grow daily. The national company hopes to reach an agreement with China on a significant increase in export volumes. QazaqGaz is also considering the possibility of new deliveries to other countries, primarily Uzbekistan. Kazakhstan also transits Russian gas to Uzbekistan.

Kazakhstan aims to increase gas production to meet domestic demand and increase export revenue. According to Bloomberg, the country sends about four billion cubic meters of gas to China per year, while its own consumption is 21 billion cubic meters. In 2023, Kazakhstan and China extended a three-year export agreement.

The supply increase to China could cover the losses incurred on Kazakhstan's domestic market with the proceeds received. State price regulation makes domestic gas sales unprofitable. QazaqGaz, therefore, must increase exports, requesting crucial producers increase production. The national company is developing a new pricing scheme to support suppliers and is collaborating with Qatari investors on projects to increase gas production. The plans include increasing production output by 3.5 billion cubic meters by 2029.

Additionally, QazaqGaz expects to build a new gas pipeline alongside its Beyneu-Bozoy-Shymkent link feeding into China. The capacity of the Beineu-Bozoi-Shymkent gas pipeline may be insufficient, therefore necesitating the construction of the second line. This project will cost a considerable amount: from three to six million dollars. It will also take two to three years to implement. Sanzhar Zharkeshov notes that QazaqGaz might issue Eurobonds worth a billion dollars in 2025 to finance its projects. The final decision on constructing the new gas pipeline will be made by the end of 2024.

Although China has secured some good liquefied natural gas contracts, the price of LNG is not competitive compared to pipeline gas. Therefore, our focus is on fulfilling our obligations to China during this winter season, concluded Sanzhar Zharkeshov. 

Russia has pushed to significantly increase gas supplies via the Power of Siberia 2, but negotiations over the pipeline have hit a bump in the road. This past August, Mongolia's government chose not to include the pipeline connecting Russia to China through its territory in its spending plans for the next four years. China has other options, including Line D via Central Asia. Its primary supplier would be Turkmenistan, though both the Power of Siberia 2 and Line-D would carry gas to different parts of China.

Meanwhile, according to Deputy Prime Minister Alexander Novak, Russian LNG exports are projected to increase by 6% to 35 million tons for 2024.