Kazakhstan has found gas for supplies to China

Kazakhstan announced a new contract to export gas to China in 2023–2026, without disclosing details of the deal. The contract was concluded two weeks after Gazprom began supplying its gas in transit through Kazakhstan to Uzbekistan. It is unlikely that Kazakhstan has its own gas to increase supplies to China: the country does not provide volumes under the current contract with China, and this heating season the authorities allowed a complete refusal to export in order to ensure the domestic market. According to analysts, new agreements may concern either the updating of the current contract with China, or involve gas supplies under a swap scheme with the Russian Federation.

Kazakh QazaqGaz and Chinese PetroChina signed a gas purchase and sale agreement for 2023–2026, according to the company’s message. The scope of the contract concluded during the visit of Kazakh President Kassym-Jomart Tokayev to the PRC and other details are not disclosed. The QazaqGaz message only notes that the new contract will allow “to take cooperation on the export of Kazakh gas to China to a new level.”

Kazakhstan and China already have a contract for the supply of up to 10 billion cubic meters of gas per year, but in recent years it has not been fulfilled due to a shortage of raw materials in the country. In 2022, gas production in Kazakhstan amounted to about 26 billion cubic meters, consumption – 21.7 billion cubic meters. Deliveries to China in 2022 amounted to about 4.4 billion cubic meters, for eight months of this year – 2.84 billion cubic meters. Kazakh officials have stated several times that the country may completely stop gas exports in the winter of 2023–2024 in order to meet the needs of the domestic market.

“We are currently observing a steady increase in gas consumption within the country, associated with the topic of industrial projects,” said the country’s Energy Minister Almasadam Satkaliev on October 11. “The complex of these measures leads to the fact that at some point we can reduce our gas export volumes in the PRC and until the commissioning of gas pumping capacities (at the Kashagan and Karachaganak fields by 1 billion and 4 billion cubic meters, respectively.— “Kommersant”) accept gas from the Russian Federation.” According to him, the completion of projects at Kashagan and Karachaganak is planned for 2028–2029.

The only source of additional gas available for Kazakhstan in the near future is Russia.

In October, Gazprom began supplying gas in transit through Kazakhstan to Uzbekistan, which experiences an acute shortage of fuel in winter. By the end of the year, the Russian Federation will supply up to 800 million cubic meters to Uzbekistan, annual supplies should amount to 2.8 billion cubic meters, the contract was concluded for two years. As the head of the Ministry of Energy of Uzbekistan, Zhurabek Mirzamakhmudov, reported on October 9, negotiations are currently underway with Gazprom on concluding a medium- and long-term contract for gas supply.

Due to the fall in exports to Europe, Russia is trying to redirect the lost volumes to the countries of Central Asia. Last November, Gazprom began discussing with Kazakhstan and Uzbekistan the creation of a “gas union” to supply Russian gas to the domestic markets of these countries and possible transit to China.

With an increase in gas consumption by 5%, according to forecasts by the Ministry of Energy of Kazakhstan, by the end of 2023 the country may experience a deficit of up to 2.2 billion cubic meters, notes Evgenia Popova from Implement. In her opinion, what is critical is not so much the annualized deficit as local deficits during the heating season, as happened last year, when daily consumption was twice the annual average.

Ms. Popova believes that a swap scheme is used to supply gas to China: Russian gas is supplied to Kazakhstan, and raw materials produced in Kazakhstan are supplied to China.

According to Sergei Kondratyev from the Institute of Energy and Finance, in 2023–2025, Kazakhstan’s gas balance will remain tight and there will be no opportunity to increase exports. He believes that the gas supply agreement signed by QazaqGaz with PetroChina International for 2023–2026 may not concern the supply of new volumes, but clarification of the schedule under the existing contract.

Tatiana Dyatel