Russia loses out to China in gas race

Russia loses out to China in gas race

27 Jun, 12:01 PM

The China National Petroleum Corporation has signed a 30-year deal to increase purchases of natural gas from Turkmenistan by 30%, Chinese media reported  - a landmark agreement for Beijing as it competes with Moscow for access to Central Asia's energy wealth.

"This agreement is very important for ensuring a stable, long-term and adequate supply of gas for this pipeline," Chinese Vice Premier Li Keqiang said at an official signing ceremony, according to the state-run newspaper Neutral Turkmenistan.

Li Keqiang met with his Turkmen counterpart to sign the contract, which increases gas deliveries to 40 billion cubic meters annually, the newspaper reported.

The deal comes amid strained relations between Turkmenistan and Russia, which usually buys most of the Turkmen gas for onward sale in Ukraine and Europe.

Turkmenistan lashed out against Russia following an explosion in April at a gas pipeline linking both countries, and it appears Moscow underestimated the fallout from that event, notes British newspaper The Guardian.

With the agreement China has moved one more step along in its bid for — and ultimately toward expanding its geopolitical influence over the wider region.

Moscow, previously a major purchaser of Turkmen gas, could be losing out to cash-rich China in the race to secure energy commitments in Central Asia.

Earlier this year, Russia moved to reduce its gas imports from Turkmenistan because of plunging demand and prices in Europe.

China sees Turkmenistan as a more politically reliable supplier than Russia, which has a well-known tendency to use energy as . Furthermore, pre-existing infrastructure in Turkmenistan means the Turkmen deal could prove cheaper than the Russian deal, even if Turkmen natural gas is more expensive. China also wants access to Central Asia’s energy, and Turkmenistan is a critical piece of the puzzle.

Meanwhile, China appears ready to invest some $3 billion to develop the South Yolotan gas field, one of the world's largest as Russian gas monopoly Gazprom announces a 30% cut in capital investments.

Turkmenistan holds more than 20 trillion cubic meters of estimated natural gas reserves.

Work on a 7,000-kilometer pipeline from Turkmenistan to China is expected to be finished by the end of the year.

Tags: China, Turkmenistan, Russia, gas deal, energy wealth

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