Chinese pipe

Let's remind its prehistory. First time that the idea was expressed was in 1997, but the project still remained on paper, it appeared that on the way of its realisation there were a number of problems. In the first place, to make a pipeline economically justified, it is necessary to pump at least 20 million tons of oil per year through it (according to other information - 30 million).

There were not that much of "free" oil in the country. And an abrupt growth of the production volumes was not expected either. Secondly, there were quite a lot of problems in the project itself, the main one of them being a very big length of the pipeline. This moment seemed to be ignored by the project ideologues. The oil pipeline in fact would have a route from West Kazakhstan to East China and it means more than 5 thousand kilometres. Many believed that the construction of such a long pipeline was not realisable at least due to its huge prime cost.

And the project was actually frozen. The technical justification of the oil pipeline was prepared quite quickly, but without its main component - the economic one. Then in the late 1990-s an unprecedented growth of prices for energy resources appeared and the issue of pipeline to China lost its relevance - with long time high prices also the traditional markets looked quite attractive. Also struggles between USA and Russia over Baku-Cheyhan pipeline, to which Kazakhstan can potentially connect, played their part. It pushed the Chinese route backward: all attention of analysts and politicians was lately fixed on the Turkish transit. The Chinese route was virtually forgotten.

Perhaps, it would go on the same way, if not for the events around "Yukos". The company has never been among leaders of Russian oil business, represented in Kazakhstan, no serious project with its participation in Kazakhstan are known. But an influence of events around "Yukos" in Russia can have serious consequences here as well.

It is well-known that in Russia the construction of an export oil pipeline in Far East was one of the biggest projects in the oil area. According to one version it had to reach Nakhodka port in order to carry Russian oil by tankers from there to USA, Japan, Korea. Japan was especially interested in the project. According to the second option the pipeline had to reach the Chinese town Datsin and was tightly linked to the Chinese market. "Yukos" was the main lobbyist of the second project. And now the company has well other problems.

On the official level a decision on the pipeline route has not been made yet, it all must worry the Chinese party that is interested in stable oil deliveries a lot. And here are the grounds for resurrecting the interest towards the project of West Kazakhstan-China pipeline. Although there have not been any official statements on this, as a matter of fact, certain consultations, at least on the level of experts, must already be going on.

In general the situation for the project to re-appear from many years of letargy and start to be realising is quite successful. Of course, it does not mean that the oil pipeline will start to be constructed very soon. The main point is that there is a lack of excessive volumes of oil that would not be contained in traditional export routes. The volumes of oil production in Kazakhstan are growing mainly at the expense of those fields that belong to American and British companies.

Will they want to supply their oil to Chinese market instead of traditional, Western European? With this China will be strengthening objectively, while the big oil business is closely connected with geopolitics, it can't allow itself to ignore its reasons. It is well-known that Kazakhstan suggests that in the future it will be able to increase the volume of oil production on its territory from the current 50 million tons per annum to 150 and then the oil will be enough for all. But who know when it happens, if it happens at all.

But there is a possibility to resolve this problem as well. For this supplies of Kazakh and Russian oil through the future oil pipeline should be mixed. The oil from Russian West Siberia will come to Kazakhstan through a pipeline existing since the times of the USSR, get mixed with those volumes of Kazakhstani oil that may be allocated for the Chinese market and already in this "ally" mixture come to China. So, economically and technologically the project is quite realisable potentially. And if the Chinese offer conditions of financing its construction acceptable for Kazakhstan, the main problems should be considered principally resolved.

The main questions can appear here with regard to its geopolitical consequences - obviously, no matter by what scheme the oil pipeline is constructed, it will bring to the strengthening of positions of China in Central Asia. And this factor always worried many people. Nevertheless, the seriousness of Beijing intentions about realisation of this project is obvious - it is forced to increase volumes of the imported oil and it will do it if not at the expense of Russian supplies through Far East, than with the help of Kazakhstani direction.

However, at least one serious question to the technical side of the whole affair remains. The oil pipeline, passing the territory of Kazakhstan, must enter China and there connect to already existing oil pipeline coming from Chinese fields Tarim and Karamai to the central part of the country. But nothing is known about whether these Chinese pipelines do have free capacities to accept big volumes of oil from Kazakhstan?

Information about the oil industry of China in general and Xingjian especially is quite closed and Kazakh experts don't seem to know the answer to this question. Meanwhile it is principally important to define the viability of the project. If the capacity of Chinese pipelines is not enough, it should be extended, that is new pipelines should be built, which can significantly increase costs of the project.

And it is quite possible that it is so, because during last years China was increasing the oil production in Xingjian, which means that the load of Chinese pipes had to be growing.