Kazakhstan aims to boost China's gas exports with possible new pipeline – BNN Bloomberg

(Bloomberg) — Kazakhstan is in talks with China to boost gas exports and is even considering building an additional pipeline to boost gas flows, underscoring the growing importance of its role in the region's fuel market.

Kazakhstan will compete with neighboring countries such as Turkmenistan and Russia for Chinese demand. Moscow's invasion of Ukraine nearly three years ago left the country cut off from key buyers in Europe and China becoming a key alternative market even as economic momentum slows.

“Despite reports of an economic slowdown in China, demand for gas continues to grow,” said Sanzhar Zharkeshov, CEO of national gas operator QazaqGaz NC JSC. “We hope to reach a consensus on increasing our export volume to China and possibly other countries such as Uzbekistan.”

The operator's discussions with China involved “significantly higher volumes” than current Kazakh exports, he added.

The world's largest landlocked country is trying to boost gas production to meet growing domestic demand while boosting export revenue. Currently, about 4 billion cubic meters of gas is sent to China, while it itself consumes about 21 billion cubic meters. In 2023, the two countries renewed a three-year export agreement.

Increasing fuel shipments abroad could help QazaqGaz offset unprofitable domestic sales, where sales prices are kept low by the government.

The operator is working with major producers – including state-owned KazMunayGas National Co JSC and the Tengiz, Kashagan and Karachaganak fields – to increase production. QazaqGaz will introduce a new gas pricing formula to support producers, Zharkeshov said.

It is also working with Qatari investors on projects that will increase gas production by another 3.5 billion cubic meters by 2029, as well as exploration activities with Chevron Corp., he said.

In addition, QazaqGaz plans to build a second pipeline that feeds into a larger connection to China.

The latter is currently at about 70% capacity, so there is still scope for additional deliveries, he said. The new injection would cost between $3 billion and $6 billion and could take two to three years, with a decision made later this year.

QazaqGaz could issue a Eurobond to finance its projects next year, Zharkeshov added, with a potential issue size of up to $1 billion, depending on market conditions.

“Although China has some good LNG contracts, the price of LNG is not competitive compared to pipeline gas,” he said. “Therefore, our focus is on fulfilling our commitments to China this winter season.”

– With support from Anna Shiryaevskaya.

©2024 Bloomberg LP