Sino-Kazakh oil pipeline to begin construction

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Last updated at: (Beijing Time) Thursday, March 11, 2004

Sino-Kazakh oil pipeline to begin construction

China's first major land-based oil import route is expected to begin construction this summer, linking the nation with Kazakhstan.

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China's first major land-based oil import route is expected to begin construction this summer, linking the nation with Kazakhstan.

The two countries will first start to build a 1,200 kilometre section from Atasu in Kazakhstan, via the border town of Alashankou, to Dashanzi in China's Xinjiang Uygur Autonomous Region, according to Wang Yongming, director of the Xinjiang economic and trade commission.

The US$3 billion pipeline will reach westwards joining the existing 450-kilometre Atyrau-Kenkiyak pipeline in central Asian republic, once it is completed in two year's time.

The three-section trunkline, with a total length of over 3,000 kilometres, would be able to deliver up to 20 million tons of Caspian Sea crude annually to western China.

China News Agency quoted Wang as saying that the China National Petroleum Corp (C NPC) -the company representing the Chinese government to build the pipeline - "will start to build Alashankou-Dashanzi section in July."

"It is the major breakthrough for the construction of this important project," said Wang.

The Sino-Kazakhstan pipeline was first proposed in 1997. But negotiations were suspended for six years until more oil reserves were found in order to make the project economically viable.

Kazakhstan, which now exports 70 per cent of its oil from pipelines linked to Russia, wants to find more export markets. China, on the other hand, needs more oil to fuel its soaring economic growth and also diversify its oil imports.

At present, more than 60 per cent of the nation's imports come from the Middle East via the unsettled Malacca Strait.

The country is also competing with Japan to persuade Russia to build a similar crude oil pipeline from East Siberia to Northeast China.

"It is very important for China to establish an onshore oil import channel," said Hu Jie, an engineer with an oil and gas exploration research institution under the CNPC. "It is just too dangerous to rely on all of our imports coming on sea routes."

The pipeline would also help link up the oilfields CNPC invests in, giving China better access to Kazakh oil.

CNPC has so far invested almost US$700 million in the central Asian republic.

But experts continue to express concern over the economic competitiveness of Kazakh oil, because most of China's oil is consumed in the east of the country. Transporting Kazakh oil either by rail or by building a new pipeline would be too expensive compared with oil imports from elsewhere.

CNPC officials indicated that part of the oil would be processed at local refineries in Xinjiang. The oil products will then be transported to Lanzhou in neighboring Gansu Province where they will be delivered via an existing oil products pipeline to markets in Central China.

The remaining crude oil would be transported to refineries in Lanzhou.

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