Former Soviet states to rely on exports to China

According to the latest report from Douglas Westwood, former Soviet states will predominantly rely on China to import oil and gas volumes to 2020.

Central Asia

Central Asia’s large and relatively underdeveloped reserves have become a key focus for CNPC in recent years. The NOC’s US$ 5 billion farm-in to Kazakhstan’s offshore Kashagan field, its largest overseas investment, indicates China’s willingness to invest in the region. Despite Kashagan possessing some of the world’s largest oil reserves – at 38 billion boe – the field has seen little output since the original PSA was signed in the 1990s due to problems with sea ice and gas leaks. With this, we predict that production will reach a disappointing 0.52 million boe/d by 2020 and will require 250 well completions to do so. However, further investment is due from CNPC next decade, potentially giving the capital-hungry project a significant boost.

Uzbekistan

Uzbekistan’s role in supplying China exists in both mid- and upstream. The Central Asia-China pipeline runs through central Uzbekistan from Turkemenistan and added to the collaboration between the two countries; CNPC and Uzbekneftegaz already jointly operated several fields together. In 2010, the two countries signed a 66 million boe per annum gas supply deal which saw Uzbek gas production climb from 0.99 million boe/d in 2010 to 1.1 million boe/d in 2013 as CNPC began redeveloping mature fields. However, with Uzbekistan recently rated as one of the riskiest operating environments, it is uncertain that this supply target will be met consistently. If the Uzbeks are to fulfill their obligations, around 160 gas wells must be drilled each year into the 2020s to at least maintain production at current levels.

Turkmenistan

Turkmenistan is also seeing the benefits of the Central Asia-China pipeline. Since 2007, CNPC and Turkmengaz have been ramping up production from the considerable reserves of the Amu Darya River region; contributing to a gas supply deal of 198 million boe per annum. This development has seen Turkmenistan’s gas production rise nearly 200 000 boe/d in two years from 2011-2013 coupled with a doubling of gas well completions over the same period from 30 to over 60. Along with rejuvenation of old wells, CNPC have constructed a gas processing plant in the area. The Chinese investment does not stop there. The last few years have seen the China Development Bank provide over US$ 8 billion to the South Yoloten project; estimated to be the second largest gas field in the world. Considering such investment, DW estimate gas production will reach 2 million boe/d by 2020 with a 59% increase in well completions from 2013 levels.

Chinese consumption

These export-reliant Central Asian countries will no doubt take comfort in the fact there is unlikely to be a let-up in China’s growing domestic consumption well into the 2030s (BP). This situation will contribute to the Former Soviet Union states’ 14% rise in output and 17% growth in well completions by 2020.

Source: Douglas Westwood

Edited by Katie Woodward

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