September 3, 2013 / 5:43 PM / 6 years ago

UPDATE 1-China secures larger Turkmen gas supplies

* Chinese, Turkmen heads stress “strategic partnership” sealed by gas

* Xi, Berdymukhamedov to launch output at Galkynysh field on Wednesday

* Gas exports to Russia have fallen by three quarters

* China National Petroleum Corp to carry out second development phase at Galkynysh (Recasts, adds Xi, Berdymukhamedov quotes, details, background)

By Marat Gurt

ASHGABAT, Sept 3 (Reuters) - China, which has overtaken Russia as the main consumer of natural gas from Central Asia, secured on Tuesday larger volumes from the region’s top producer Turkmenistan to fuel its economy.

The gas deal allows China, the world’s largest energy consumer, to increase its foothold in the resource-rich region, while helping the former Soviet republic to lessen its dependence on Russia.

The Central Asian country of 5.5 million, which borders Afghanistan and Iran, holds the world’s fourth-largest natural gas riches after Russia, Iran and Qatar.

China’s President Xi Jinping, who started his Central Asian tour in the Turkmen capital of Ashgabat, oversaw with Turkmen President Kurbanguly Berdymukhamedov the signing of a purchase agreement for 25 billion cubic metres (bcm) of gas a year between China National Petroleum Corp and state firm TurkmenGas.

“As a result, it will be possible to ship (annually) up to 65 bcm of gas,” Berdymukhamedov told reporters.

A senior Turkmen official, who asked not to be named, told Reuters on the sidelines of the talks that gas exports to China would reach that level by 2020.

Exports to China were 20 bcm in 2012, according to official Turkmen data. China has existing contracts to increase purchases of Turkmen natural gas to 40 bcm in coming years.

Xi and Berdymukhamedov will launch production at the giant Galkynysh natural gas field in Turkmenistan’s east on Wednesday.

It is Galkynysh that will provide the additional 25 bcm of gas a year to be shipped to China.

Galkynysh, with reserves estimated by auditors Gaffney, Cline & Associates at between 13.1 trillion and 21.2 trillion cubic metres, is the world’s second-largest natural gas deposit and stands for “Renaissance” in Turkmen.

The mainly Muslim nation, in which Berdymukhamedov enjoys virtually unlimited powers and is titled Arkadag (The Patron), has pinned its hopes of future prosperity on developing the mammoth reservoir.

Berdymukhamedov also announced that the fourth branch of a gas pipeline to China, running through Uzbekistan, Tajikistan and Kyrgyzstan, will be built to ship the 25 bcm of gas.

STRATEGIC RELATIONSHIP

“We have raised our relations to a new strategic level,” said Xi, who signed a strategic partnership declaration with Berdymukhamedov.

“Cooperation in the gas sphere targets a long-term period, which truly reflects our relations of mutual trust,” he said through an interpreter.

Turkmenistan’s gas exports to Russia dropped by three quarters to 10 bcm in the last few years due to sluggish demand for the fuel in Europe.

Turkmenistan, which also exports small volumes of the fuel to next-door Iran, plans to produce 76.9 bcm of natural gas this year and export 43.9 bcm. It plans to more than triple natural gas output in the next two decades.

Service contractors from China, the United Arab Emirates and South Korea have implemented the first phase of development at Galkynysh, which was begun in 2009 and is worth $9.7 billion.

In line with separate agreements signed on Tuesday, China will finance the second stage of development at Galkynysh which will be implemented by China National Petroleum Corp. No further details were immediately available.

The Galkynysh complex consists of three gas processing plants with a combined annual capacity of 30 bcm of natural gas. (Writing by Dmitry Solovyov; Editing by Anthony Barker and Louise Heavens)

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