Atasu-Alashankou Pipeline

Fig. 1: China's total production and consumption of oil. (EIA data).

In 2003, Kazmunaigas, the National Oil Company of Kazakhstan, and China National Petroleum Corporation (CNPC) started Atasu-Alashankou pipeline project. The significance of this project is not in its carrying capacity, but in its symbolic value. The total length of the pipeline is 2830km. [1] The pipeline consists of three sections. The first section has been operational since 2003 and connects Kenkiyak field with Atyrau. The second station has been operational since 2006 and connects the pumping station and railway terminal in Atasu, Karaganda Region, to the Dostyk-Alashankou station on the Chinese-Kazakh border. The third section is expected to be in operation in 2011. It will connect the Kenkiyak field to Kumkol field. Kumkol-Atasu section has existed since the Soviet period.

The pipeline started operation in 2006, with the current capacity of 10 million tons of oil a year (or 200,000 bbl/day). [1] There is already intent to double the capacity to 20 million tons of oil a year (400,000 bbl/day) by 2011. [1] To put the numbers in perspective, 400,000 bbl/day is

The intended capacity of Atasu-Alashankou pipeline is 5 times smaller than that of Prudhoe Bay pipeline. In 2009, China oil consumption was 8.22 million bbl/day (Fig. 1). Therefore, the pipeline with the capacity of 10 million tons of oil a year would supply 2.43% of the 2009 oil demand of China.

Fig. 2: Chinas net oil exports/imports (EIA data)

China is the second largest oil consumer behind the United States. [2] From Fig. 2, it can be seen that China became a net oil importer in 1993. In 2006, it was already the third largest net importer of oil and its appetite for energy does not seem to curb down. According to EIA 2008 data, oil is the second largest source, accounting for 15% of the country's total energy consumption. [2] With the world's largest population and a rapidly growing economy, China requires a stable supply of oil. To guarantee this stable supply of oil, in 1997, Chinese authorities came up with a strategy plan, the main element of which is the purchase of oil fields abroad. [3] Additionally, China seeks to decrease its dependence on energy importation by tankers because they are too vulnerable to geopolitical risks. [3] Atasu-Alashankou pipeline is a good example of the implementation of the plan.

China wants to secure its imports by directly acquiring foreign fields. Between 1997 and 1998, China bought oil fields in Sudan, Venezuela and Kazakhstan for the total of more than eight billion dollars. [4] In 1997, CNPC acquired 60 percent of the shares of the oil company Aktobemunaigaz in Kazakhstan. In 2003, they bought additionally 25 percent. Currently, Aktobemunaigaz controls one seventh of oil production in Kazakhstan. [3] After that point, CNPC bought shares in a number of fields and companies, including Petrokazakhstan with twelve percent of Kazakhstan's oil production. [3] As a result, China currently plays a significant role in Kazakhstan's oil production.

Fig. 3: Kazakhstan's total production and consumption of oil. (EIA data)

To ensure the profitability of the project, the pipeline should be filled with twenty thousand tons of oil a year. It could later be increased to 50 million tons a year (1 million bbl/day). [4] The obvious question is the capability of Kazakhstan to supply that amount of oil. Fig. 3 shows the trend of Kazakhstan's oil production and consumption. In 2009, Kazakhstan produced 1.54 million bbl/day and consumed 0.241 million bbl/day. Thus, Kazakhstan had net oil exports of about 1.3 million bbl/day. 10 million tons of oil a year capacity comprises 13% of 2009 oil production of Kazakhstan. After developing Kashagan field, which is believed to be the largest oil field outside the Middle East and the fifth largest in the world in terms of reserves, the government of Kazakhstan plans to increase its oil production to 130 million tons of oil a year (2.6 million bbl/day). [5,6] Additionally, there are plans to supplement the capacity with Russian oil. [3]

Fig. 4: Kazakhstan's net oil exports/imports (EIA data)

The construction of the Atasu-Alashankou pipeline is a good example, displaying the intentions of the Chinese government. To satisfy the growing demand for oil, secure and diversify the imports, the government of China is investing to buy fields in countries like Kazakhstan to decrease its energy dependence on the countries of the Persian Gulf. It is also interesting to see the willingness of the Kazakh government to lease its fields to China. Doing so, Kazakhstan is trying to decrease its dependence on Russia. Currently most of Kazakh oil is exported via Russia. Therefore, the construction of Atasu-Alashankou pipeline was an important event for both Kazakh and Chinese governments.

© Ernar Sagatov. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.

References

[1] "5th Eurasian Energy Forum KAZENERGY," KazMunaiGaz, 11 Oct. 2010.

[2] "China Energy Data, Statistics and Analysis," U.S. Energy Information Administration, Country Analysis Brief, November 2010.

[3] S. Peyrouse, "Economic Aspects of the Chinese-Central Asia Rapprochement," Central Asia-Caucases Institute, Silk Road Studies Program, September 2007, pp 46-61.

[4] M. Kielmas, "China's Foreign Energy Asset Acquisitions: From Shopping Spree to Fire Sale?," The China and Eurasian Forum Quarterly 3, No. 3, 27 (2005).

[5] "Kazakhstan Energy Data, Statistics and Analysis," U.S. Energy Information Administration, Country Analysis Brief, November 2010.

[6] "Atasu-Alashankou," Oil Transport, KazMunaiGaz, 8 Jan 2010.