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China's Hunger For Energy Resources Is What's Driving The Belt And Road
Wade Shepard ,
CONTRIBUTOR
A general view of the Atasu control station of the Atasu-Alashenkou pipeline in Atasu. (AP Photo)
While it’s not as symbolic as a Chinese flag-brandishing freight train rolling into a European port for the first time or as sexy as transforming a squalid stretch of desert into a “new Dubai,” or building a Port City on reclaimed land, or high-speed trains between iconic European capitals, or as exhilarating as the futuristic talk of hyperloops, “flying trains,” or even as flashy as optic fiber on the Karakoram Highway, the most important driver behind the Belt and Road Initiative (BRI) is far more pragmatic: energy procurement.
On October 15th, Kazakhstan will begin shipping natural gas to China via a set of pipelines that run from the frontiers of Uzbekistan to Khorgos, a massive development zone that spews over the Chinese border. The one-year deal was signed on October 2nd between KazTransGas JSC, Kazakhstan’s largest gas company, and PetroChina Company Limited, and should see five billion cubic meters of Kazakh gas flowing into far western China for a prospective take in the ballpark of $1 billion.
Kazakhstan has the world’s 15th largest known reserves of natural gas, and is currently exporting 13.7 bcm of it abroad. This new deal with China will see this number upped by over one-third.
Before now, Kazakhstan hasn’t been shipping any of its own gas to China, but plans to eventually boost exports and transit of it to its eastern neighbor to 100 Bcm per year in the future — claiming that it has the capacity to ship 10 Bcm annually to China on its own.
This new source of gas for China is slated to come from fields in the west of Kazakhstan and flow through the Beineu-Bozoi-Shymkent pipeline before connecting in with the Kazakhstan-China pipeline, which came out of a 2007 deal between Kazakhstan’s everlasting president, Nursultan Nazarbayev, and Chinese President Hu Jintao and cost $7.5 billion to construct.
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However, there are potential geo-economic ramifications to this new deal. Turkmenistan, Uzbekistan, and Russia are currently already pipelining their own natural gas to China and maintain long-term contracts to continue doing so. However, China’s appetite for this energy source is growing at an impressive clip, and is expected to rise 8.1% annually until 2030, which is far above the 2.1% global annual growth rate.
If we looked at the entire BRI in terms of China increasing, bolstering, and securing their energy supply lines alone — without any of the rhetoric about global prosperity and “win-win” partnerships — it would still make sense. The economic powerhouse that is China requires energy to run, and this is something the country has not been able to handle on its own since at least 1993.
Diversifying the sources of foreign oil and gas has been of tantamount importance to Beijing for well over a decade. In 2006, the Brookings Institute pointed this out in no uncertain terms:
The Chinese government recognizes that the diversification of China’s oil suppliers and import routes can enhance the security of the country’s oil supply. In terms of oil suppliers, China has sought not only to expand the number of countries and regions from which it imports oil but also to limit its dependence on the Persian Gulf, which in 2005 provided China with almost half of its crude oil imports… In terms of import routes, China wants to reduce its dependence on the sea lines of communication through which almost 90% of the country’s crude oil imports travel because of their vulnerability to disruption on the high seas by various modern navies.
At this time, the focus of this diversification was mainly on the array of new China-bound oil and gas pipelines that were being dug across Russia and Central Asia. What could not be foreseen then was the attempt to create no less than three multimodal transport corridors that China would spearhead under the premise of the BRI to enable energy shipments from the Middle East and to enter the country while bypassing the heavily US Navy-fortified Straight of Malacca. These three prospective corridors extend overland from the ports of Bandar Abbas in Iran, Gwadar in Pakistan, and Kyauk Pyu in Myanmar up to China, enabling energy shipments to go partway by sea and then the rest of the way by pipeline or potentially even rail.
I'm the author of Ghost Cities of China. Traveling since '99. Currently on the New Silk Road. Read my other articles on Forbes here.
Wade Shepard ,
CONTRIBUTOR
A general view of the Atasu control station of the Atasu-Alashenkou pipeline in Atasu. (AP Photo)
While it’s not as symbolic as a Chinese flag-brandishing freight train rolling into a European port for the first time or as sexy as transforming a squalid stretch of desert into a “new Dubai,” or building a Port City on reclaimed land, or high-speed trains between iconic European capitals, or as exhilarating as the futuristic talk of hyperloops, “flying trains,” or even as flashy as optic fiber on the Karakoram Highway, the most important driver behind the Belt and Road Initiative (BRI) is far more pragmatic: energy procurement.
On October 15th, Kazakhstan will begin shipping natural gas to China via a set of pipelines that run from the frontiers of Uzbekistan to Khorgos, a massive development zone that spews over the Chinese border. The one-year deal was signed on October 2nd between KazTransGas JSC, Kazakhstan’s largest gas company, and PetroChina Company Limited, and should see five billion cubic meters of Kazakh gas flowing into far western China for a prospective take in the ballpark of $1 billion.
Kazakhstan has the world’s 15th largest known reserves of natural gas, and is currently exporting 13.7 bcm of it abroad. This new deal with China will see this number upped by over one-third.
Before now, Kazakhstan hasn’t been shipping any of its own gas to China, but plans to eventually boost exports and transit of it to its eastern neighbor to 100 Bcm per year in the future — claiming that it has the capacity to ship 10 Bcm annually to China on its own.
This new source of gas for China is slated to come from fields in the west of Kazakhstan and flow through the Beineu-Bozoi-Shymkent pipeline before connecting in with the Kazakhstan-China pipeline, which came out of a 2007 deal between Kazakhstan’s everlasting president, Nursultan Nazarbayev, and Chinese President Hu Jintao and cost $7.5 billion to construct.
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However, there are potential geo-economic ramifications to this new deal. Turkmenistan, Uzbekistan, and Russia are currently already pipelining their own natural gas to China and maintain long-term contracts to continue doing so. However, China’s appetite for this energy source is growing at an impressive clip, and is expected to rise 8.1% annually until 2030, which is far above the 2.1% global annual growth rate.
If we looked at the entire BRI in terms of China increasing, bolstering, and securing their energy supply lines alone — without any of the rhetoric about global prosperity and “win-win” partnerships — it would still make sense. The economic powerhouse that is China requires energy to run, and this is something the country has not been able to handle on its own since at least 1993.
Diversifying the sources of foreign oil and gas has been of tantamount importance to Beijing for well over a decade. In 2006, the Brookings Institute pointed this out in no uncertain terms:
The Chinese government recognizes that the diversification of China’s oil suppliers and import routes can enhance the security of the country’s oil supply. In terms of oil suppliers, China has sought not only to expand the number of countries and regions from which it imports oil but also to limit its dependence on the Persian Gulf, which in 2005 provided China with almost half of its crude oil imports… In terms of import routes, China wants to reduce its dependence on the sea lines of communication through which almost 90% of the country’s crude oil imports travel because of their vulnerability to disruption on the high seas by various modern navies.
At this time, the focus of this diversification was mainly on the array of new China-bound oil and gas pipelines that were being dug across Russia and Central Asia. What could not be foreseen then was the attempt to create no less than three multimodal transport corridors that China would spearhead under the premise of the BRI to enable energy shipments from the Middle East and to enter the country while bypassing the heavily US Navy-fortified Straight of Malacca. These three prospective corridors extend overland from the ports of Bandar Abbas in Iran, Gwadar in Pakistan, and Kyauk Pyu in Myanmar up to China, enabling energy shipments to go partway by sea and then the rest of the way by pipeline or potentially even rail.
I'm the author of Ghost Cities of China. Traveling since '99. Currently on the New Silk Road. Read my other articles on Forbes here.
