MOSCOW, November 30. /TASS/. The possible creation of a "trilateral gas union" of Russia, Kazakhstan and Uzbekistan may include the construction of new gas pipelines, the export of Russian gas to the markets of India, Pakistan and additional supplies to China, experts interviewed by TASS believe.
In return, producers from Central Asia can get direct access to the European market through Russian pipes.
"It concerns bringing Russian gas to new promising markets in the context of Europe's declared refusal to import it. The idea involves both the use of existing infrastructure in the region and the construction of a new one. The main target markets here could be China in the east and Pakistan with India in the south," says Alexey Grivach, deputy head of the National Energy Security Fund, expert of the Valdai Club.
"It is almost certainly about building pipelines to the south through Afghanistan to Pakistan and possibly [deliveries] to India via a new pipeline. The question of how much of these volumes will be Russian is open to discussion, since the deal may include gas swaps, giving producers from Central Asia direct access to Europe via Russian pipes in exchange for Russia sending gas to Pakistan or possibly China using the existing infrastructure," said Ronald Smith, senior analyst at BCS World of Investments.
However, it is too early to talk about the volumes of Russian gas supplies as part of the new union, Grivach emphasizes.
"10-20 billion cubic meters per year, which came from Uzbekistan and Kazakhstan, may fall out from the Chinese direction. The internal needs of the countries may require comparable volumes. Plus, we keep in mind the markets of Pakistan and India. But in order to access them, we need to involve Turkmenistan in the project and solve security problem in Afghanistan. Work in this direction is already underway, but it is obvious that this is a very difficult task," he said.
"Russia apparently offers a reliable long-term source of gas with pricing based on the Russian domestic market and denominated in rubles, which may be important for Kazakhstan and Uzbekistan (there will be less exchange rate risks). In addition, there is the prospect of exporting Russian gas through Kazakhstan to China, which will pay for the new infrastructure. Most likely, it concerns the option of the Tyumen-Astana gas pipeline with an extension to Khorgos, which will allow to secure gas supply infrastructure in eastern Kazakhstan and reduce gas imports to Kazakhstan from Uzbekistan. Before, the Kazakh side was scared away by the high cost of the project, but with an increase in volumes, taking into account exports, the unit cost will decrease," Kirill Melnikov, head of the Energy Development Center, believes.
Why do Kazakhstan and Uzbekistan need it?
Additional volumes of gas supplies from Russia may be needed by both Kazakhstan, which has long wanted to develop gas supply infrastructure in the northern regions of the country, and Uzbekistan, where production is rapidly falling, "which will lead to the cessation of exports from the country to China, and a rapid increase in the need for imports cannot be ruled out," Grivach notes. Uzbekistan consumes more gas per year than France or Spain.
"In Kazakhstan and Uzbekistan, their own gas consumption is growing, while their own production is falling. Both countries are already exporting gas to China through the Central Asia-China gas pipeline, which runs from Turkmenistan in transit through Uzbekistan and Kazakhstan to Chinese Khorgos. Accordingly, both countries face the problem of how they will continue to balance their growing consumption, their own production capabilities and export obligations. In general, there are three options: the first is to develop its own production. But this is expensive in the case of Kazakhstan, since its main deposits are located in the Caspian region in the west of the country, and consumption is in the east, and expensive investments in infrastructure are needed. Uzbekistan has limited production growth opportunities, since there are no significant new reserves in the country. The second option is to import gas from Turkmenistan, the third option is to import from Russia," Melnikov says.
However, Kazakhstan is also concerned about dependence on Russian supplies in the long term, which, apparently, is the reason for the declared intention of the country's authorities to take time to consider the Russian proposal, the expert notes.
On ‘trilateral gas union’
On November 28, Kazakh President Kassym-Jomart Tokayev and his Russian counterpart Vladimir Putin discussed the creation of a "trilateral gas union" with Uzbekistan during a meeting in the Kremlin. Press Secretary of the President of the Russian Federation Dmitry Peskov explained that at the first stage it implies creating a coordination mechanism at the initiative of President Putin. Later it became known that it implies cooperation in processing and supplying gas, including to new export destinations.