Crossroads Asia

China’s Imports of Turkmen Gas Decline

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Crossroads Asia

China’s Imports of Turkmen Gas Decline

Turkmen gas exports to China fell from October to November, with sources indicating Ashgabat isn’t pumping promised volumes.

China’s Imports of Turkmen Gas Decline
Credit: Pixabay

Gas is Turkmenistan’s most significant source of revenue and China is Turkmenistan’s only significant gas buyer. That context makes recent news that Ashgabat’s supplies to Beijing have dropped yet another indication that all is not well in Turkmenistan’s economy.

Reuters reported this week that, according to data from China’s General Administration of Customs,  imports from Turkmenistan via pipeline fell 7 percent between October and November, coming in at 1.71 million tonnes.

Turkmenistan’s exports to China peaked in April at 2.61 tonnes.

While the November 2017 volume represents an 11 percent increase from November 2016, Reuters’ sources indicate that Turkmenistan is pumping short of its commitments:

Industry sources with knowledge of China’s gas imports from the central Asian nation estimated supplies from the state-owned Turkmenistan oil and gas company, Turkmengas, were about 20-30 million cubic meters per day short of volumes the Turkmen firm pledged under annual contract with China’s state oil major CNPC.

According to the Chinese customs data, in the first 11 months of 2017 imports from Turkmenistan amounted to 22.63 million tonnes, representing a 15 percent rise from the same period in 2016.

Similar Chinese customs data reported last year indicated that Turkmenistan had exported 18.32 million tonnes of gas to China in the first 10 months of 2016 (an 11.2 percent increase over the same period in 2015).

Somewhat paradoxically, while Turkmenistan’s exports to China have risen overall, its trade volume has fallen. The culprit is the price of gas, which  fallen sharply since 2014.

As Bruce Pannier noted when making a valiant attempt to make sense of the Turkmen budget, in January 2017 the Chinese ambassador to Turkmenistan, Sun Weidong, said China’s trade with the county had fallen from more than $10 billion 2013 to $5.4 billion in the first 11 months of 2016.

It bears repeating what Pannier (and many of us Central Asia watchers) have written before:

Turkmenistan owes China many billions of dollars for loans Turkmenistan accepted to build the gas pipelines to China in order to ship the gas from Turkmen fields that Chinese financial entities loaned Turkmenistan money to develop… It has never been clear what percentage of Turkmen gas goes toward paying off the Chinese loans.

With the stoppage of gas exports to Iran at the start of this year (a matter looking likely to head into international arbitration, as I discuss in the upcoming January issue of The Diplomat Magazine), Turkmenistan’s one hope is increased Chinese demand. But, if the Chinese customs data and Reuters’ industry sources are to be trusted, Ashgabat is unable to meet Beijing’s demand, let alone push more gas through the pipes.

While Turkmenistan is China’s largest gas partner, supplying nearly 40 percent of the country’s total gas imports, Beijing’s partnerships are far more diverse than Ashgabat’s. Turkmenistan’s slack was picked up by increased imports from Uzbekistan, Kazakhstan, and Myanmar. Uzbekistan and Kazakhstan share in the pipeline network that carries Turkmen gas.