2009 Jul 02

China completes expansion of major oil pipe in Kazakhstan

China secured access to vast oil deposits in western Kazakhstan today after the energy-rich Central Asian nation said it had completed the expansion of a major oil pipeline to its eastern neighbour.

A Kazakh company in charge of the project said the first test shipment of oil had been successfully completed through the newly built Kenkiyak-Kumkol pipeline.

"The implementation of this project will have tremendous influence on the whole oil and gas industry, providing new opportunities for oil exports," KazStroyService said in a statement.

The new link, which starts near the Kenkiyak field operated by China's CNPC, gives China better access to Kazakhstan's oil provinces in the west and follows Beijing's intensified efforts to boost energy supplies from Central Asia.

The first phase of the pipeline, between central Kazakhstan and China's western Xinjiang region, was completed in 2006.

The latest link expands this pipeline to Caspian Sea oil fields.

Chinese oil companies such as CNPC own stakes in several Kazakh oil producers, including CNPC-AktobeMunaiGaz, the operator of Kenkiyak and Zhanazhol fields, and PetroKazakhstan, which operates the Kumkol group of fields.

Kazakhstan, hit hard by the global economic crisis, has stepped up contacts with China for fresh investment.

Beijing further strengthened its foothold in the former Soviet republic in April after it agreed to lend Kazakhstan $10 billion in a "loan-for-oil" deal during Kazakh President Nursultan Nazarbayev's visit.

As part of the deal, CNPC bought a stake in MangistauMunaigas, a company whose fields are also close to the starting point of the extended pipeline.

Kazakhstan and China agreed to build the 3000 kilometre pipeline in 1997 and have said they would later double the capacity of the combined pipeline from the current 10 million tonnes a year.

Kazakhstan, which produced 71 million tonnes of oil last year, plans to double output within the next decade and seeks to diversify its exports as well as sources of investment in the industry dominated by Western oil majors.

China is also building a pipeline to import up to 40 billion cubic metres of Central Asian gas a year.

The link originates in Turkmenistan and goes through Kazakhstan and Uzbekistan.

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