China’s interest in Russian gas may decrease after deal with Turkmenistan

China’s interest in Russian gas may falter as supplies of Turkmen gas under an agreement signed on Wednesday will triple to 65 billion cubic meters per year by 2014-2015, Kommersant business daily said on Thursday quoting sources.

Turkmenistan plans to start raising its gas supplies to China from next year to sell 40 bcm in 2012 against the current 17 bcm through the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline.

The paper said that Turkmenistan started competing with Russia on the Asian gas market after Gaffney, Cline Associates auditors raised their estimate of reserves of Southern Iolotan, Turkmenistan’s core gas field, to 13-21 trillion cm making it the world’s second largest.

Russia wants to sell its gas to China for $400 per 1,000 cm, the same price it sells gas to Europe, while sources close to the talks told the paper the Turkmen gas price for China would be about $250.

In return China will provide further investment in the development of Southern Iolotan, on which it has already spent $4 billion, and help increase the capacity of the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline.

Turkmenistan may also enter the European gas market by building the EU-supported Transcaspian pipeline, aimed at reducing EU dependence on Russian gas imports.

“Beijing does not want Turkmenistan to build a pipeline to the European Union, get a different gas price on the European market and then increase it for China. This is why we are ready to contract more and more gas volumes in Turkmenistan, as the capacity of our gas market allows it. Beijing will do its best to make sure the Transcaspian pipeline project is not developed,” a Chinese diplomat told the paper.

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