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This country is a landlocked state and shares borders with Russia, China, Uzbekistan, Kyrgyzstan and Turkmenistan. Traditionally, Kazakhstan has been an ally and more than a partner to Russia since the two countries have the same cultural, ethnic, language and historic backgrounds. However, Kazakhstan has declared a “multivectoral” policy1 which means a willingness to develop and improve strategic, diplomatic and economic relations with the major geopolitical powers in the international arena, namely, China, Russia, the US, Europe and the Muslim world.2 Within that list, China ranks as one of the highest priorities for Kazakhstan to collaborate with for many reasons. “resource nationalism”, i.e. the perception by producer country governments that hydrocarbons resources are a means to nation-building.
“Resource Warriors,” Asian Wall Street Journal, July 23 1997.G. Christoffersen, “China's Intentions for Russian and Central Asian Oil and Gas”, The National Bureau of Asian Research Analysis, 9, 2 (1998), p. 3.http://www.scmp.com/business/article/1069823/beijings-energy-ambitions-threatened-lack-waterThe regularity of official visits between Kazakh and Chinese officials is major evidence of the strong connection between the two countries. Two countries in particular, Iran and Sudan (which account for 11% and 5% of China’s imported oil), have been the focus of the international community—the first for its nuclear adventurism and the second for its human rights violations in the Darfur region. International attention on these states, and China’s willing relations with them, jeopardize the success of China’s “peaceful rise” policy, raising questions whether China will be a responsible actor as its sphere of influence expands.
Traversing 2,800 km just to reach the Chinese border (still far away from China’s coastal demand centers),8 and with a capacity of only a few hundred thousand barrels per day, this project is hardly economically attractive. Yet China was willing to invest in this pipeline in order to establish the route.
the development of mutual collaboration between the two countries in the oil and gas sector has significant importance for the further improvement of friendly and neighborly relations, and that it would meet the interests of the people of both states.
http://www.sfgate.com/business/article/China-slakes-oil-thirst-Kazakhstan-to-sell-2659788.phpCNPC funded the construction cost of $806 million for the thousand-lm leg from Atasu and Alashankou
2008: China imported an average of only 115,000 bpd of crude oil from Kazakhstan by pipeline and rail.Barrels per dayOnly about half of its total capacity—due to pricing disputes and problems with supply availability that created gaps, only partially filled with Russian crude from western Siberia. and also because lighter, less waxy Russian oils are blended with waxy Kazakh crudes during the winter to prevent them from solidifying and blocking the line.
Kazakhstan and China for oil –
examine Kazakhstan external relations to China in relation to oil
Lau Yin Yu Nina
• The largest energy producer and exporter in the Central Asian
and Caspian region, has generally pursued economic policies
based on oil-led economic development.
• In the 1990s, Kazakhstan’s political and economic elite pushed
more vigorously than others in Central Asia for privatization and
other pro-market economic reforms – and some economists
have argued that the imperative of achieving greater economic
independence from Russia pushed them further in that
• Oil remains its most important industry and most valuable
• “Resource Nationalism”
• The country's main oil reserves are located in the western part of the country,
where the five largest onshore oil fields (Tengiz, Karachaganak, Aktobe,
Mangistau, and Uzen) are located
• New Resource Warriors
• The majority of China’s imported energy comes from the
Middle East and Africa, accounting for 45% and 28.7%
• China’s demand for oil is expected to more than double
• “pipelines through China from Central Asia and Russia
would help to diversify Northeast Asian energy supply -
reducing the region’s dependence on supplies from the
Middle East” (Christoffersen)
• Aspirations to become a global energy player
Bilateral oil cooperation
• September 1997: Framework Agreement on Projects for Fields Development and
Construction of West Kazakhstan-China Oil Pipeline between CNPC and Ministry of
Energy and Natural Resources of Kazakhstan
– Pipeline to go from Atyrau to Alashankou
– CNPC will secure minimal guaranteed transportation volume of 20 mty and financing for the project
• 1999: Agreement on Cooperation in the Oil and Gas Sector between the Governments of
Kazakhstan and China
• 2003: Agreement on Joint Study of the Two-Stage Construction of the Kazakhstan-China
Pipeline between KMG and CNPC
– Agreed to prepare Feasibility Study for two-stage construction of the pipeline
Bilateral oil cooperation
• 2004: China and Kazakhstan announced the building of the oil pipeline
from western Kazakhstan to Xinjiang; Agreement on the Main Principles
for Construction of the Atasu-Alashankou Pipeline between KMG and
• 2005: Agreement on Joining KazTransOil’s and Atasu-Alashankou
• 2006: Agreement on Operation and Maintenance of the Atasu-Alashankou
Pipeline between Kazakhstan-China Pipeline company and KazTransOil
• October 2009: China and Kazakhstan completed an extension of the oil
pipeline all the way to western Kazakhstan.
Agreement on collaboration in oil and gas
• Both states will undertake all necessary measures and actions to support and encourage the establishment of
direct connections between corresponding agencies, enterprises and companies; and will research further
approaches to develop the oil and gas sector and the extension of its scope.
• Supported the construction of a pipeline which would connect the Western part of Kazakhstan with the
Western region of China.
• China approved the Chinese National Petroleum Corporation (CNPC) as the company responsible for the
construction of a pipeline, the financing arrangements and the preparation of the Technical- Economical
Justification of the project.
• Kazakhstan agreed to provide land lots and construction sites for the construction of a pipeline, guaranteed to
provide pipeline security, and also stabilized the export duties for oil and import taxes for the necessary
Kazakhstan-china oil pipeline
• KazStroyService: the leading engineering-
construction company in Kazakhstan
• KazMunayGas: the state-owned oil and gas
company of Kazakhstan
• China National Petroleum Company (CNPC):
one the world’s largest oil and gas suppliers,
providers and engineering-construction firms
Kazakhstan-china oil pipeline
• China’s first transnational pipeline and Kazakhstan’s first
transnational pipeline to its neighbour to the east.
• The project was undertaken by the Sino-Kazakh pipeline
company, a “50:50 venture
• Currently capacity is at 14 million tons per year
• Expected nominal capacity of 20 million tons per year in 2014.
• The total cost of the project has been estimated at US$3-3.5
billion; phase two of the project, initially supposed to cost around
US$700 million, cost an estimated US$850 million.
Kazakhstan-china oil pipeline
• Three sections:
From Keniyak to Atyrau 279 miles 2003
From Atasu to Alashankou 613 miles 2005
Kenkiyak to Kumkol -- 2009
Kazakhstan-china oil pipeline
• Rules for pipeline access
– All potential shippers are guaranteed equal access to the pipeline when capacity is available
– CNPC and KMG have priority rights of accessing the pipeline capacity
– Pipeline capacity, first of all, will be used to fulfill the obligations under long-term oil
– If one of the parties does not use its pipeline capacity in full, the other party has the right to
use such unused capacity
– In case transportation volumes under contracts exceed the pipeline capacity, the rights for
transportation will be executed according to the shares of KMG and CNPC in the Project
• The pipeline current capacity is approximately 200,000 bpd
• 2008: China imported an average of only 115,000 bpd of crude oil from
Kazakhstan by pipeline and rail.
• In December 2007, the pipeline carried an average of 102,600 bpd
• Only about half of its total capacity
• Reason: Current Kazakh production does not yet completely fill the line
• The transport of construction vehicles, equipment, personnel
and pipes in this huge and remote region are a logistic
• Heavy pipes must be healed over huge distances over soft
• Wear and tear construction vehicles in this environment is so
severe that they require monthly service and replacement
• Construction workers need to be conveyed to and from working
camps and pumping stations daily
• Insufficient diameter
• The pipeline could only be an economic success if the pipeline could
deliver 20 million tons of oil annually.
• The 311 mile (approximately 500 kilometres) pipeline that existed for
most of the way between Kenkiyak and Atasu had to be rebuilt.
• China wins
- It gains what it sees as “secure oil supplies
• Kazakhstan wins too
- It gains a crude export route independent of Russia and a
new market for its oil.
• Meet Kazakhstan's national security interests, and provide an
outlet to meet China’s growing demand for oil.
• Downside: PRC can potentially control the price paid for the oil
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