China Ups Natural Gas Purchases

China is making a point to invest in contracts directly and controlling the production of natural resources through direct acquisitions of corporations (not just stock) - effectively skirting western middle men.

China sign landmark deal to buy 40 billion cubic meters of Turkmen natural gas annually

ALEXANDER VERSHININ, Associated Press Writer
3:33 AM PDT, June 25, 2009

ASHGABAT, Turkmenistan (AP) — China signed a 30-year deal to increase purchases of natural gas from Turkmenistan by 30 percent, state media reported Thursday — a landmark agreement for Beijing as it competes with Moscow for access to Central Asia's energy wealth.

No value was announced for the deal, which also marks another step forward in Chinese efforts to find long-term, stable energy supplies.

Chinese Vice Premier Li Keqiang met with his Turkmen counterpart Wednesday to sign the contract, which increases gas deliveries to 40 billion cubic meters (52 billion cubic yards) annually, the state-run newspaper Neutral Turkmenistan reported.

Work on a 7,000-kilometer (4,300-mile) pipeline from Turkmenistan to China is expected to be finished by the end of the year.

"This agreement is very important for ensuring a stable, long-term and adequate supply of gas for this pipeline," Li said at an official signing ceremony, according to the newspaper.

China has also committed to lending Turkmenistan's state gas company $4 billion on preferential terms, the newspaper reported.

No details were given, but Turkmen media last month reported that China had promised to lend $3 billion to develop the vast South Yolotan natural gas field close to the Afghan border. An independent audit by a British company last year said the field may be one of the five largest in the world.

The deals come amid strained relations between Turkmenistan and Russia, which usually buys most of the Turkmen gas for onward sale in Ukraine and Europe.

Earlier this year, Russia moved to reduce its gas imports from Turkmenistan because of plunging demand and prices in Europe.

The two countries have also sparred over a blast in April that damaged a major pipeline that transports Turkmen gas to Russia. The route has been repaired but supplies have not resumed amid mutual recriminations over the cause of the explosion.

Li also signed an additional deal for state-owned China National Petroleum Corporation to take gas from the Bagtyyarlyk field near Turkmenistan's border with Uzbekistan, the newspaper reported. The Turkmen government believes the field holds up to 1.3 trillion cubic meters (1.7 trillion cubic yards) of gas. CNPC was awarded the license to explore and develop the field in 2007.

Turkmenistan has long exported nearly all its gas to Russia, with the exception of a small amount sent to Iran.

Some international experts have voiced doubt that Turkmenistan could meet all its supply obligations, but the government insists there is enough gas to supply all buyers.

Turkmenistan estimates its total reserves at more than 20 trillion cubic meters (26 trillion cubic yards), but international experts have questioned that figure.