China, Russia Pursue Mongolia Gas Project
Less than a week after opening its first natural gas pipeline to China, Russia has mounted a new push for a second route through Mongolia to replace earlier plans for a line through Xinjiang.
On Dec. 5, Russia and Mongolia signed a memorandum of understanding (MoU) on a joint assessment for a feasibility study to pipe Russian gas through Mongolia to China, reports from the three countries said.
|
Advertisement: The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business. |
Although the steps are preliminary, they have received high-level attention with a commitment to an accelerated time frame.
The MoU followed meetings in Russia between President Vladimir Putin, Prime Minister Dmitry Medvedev, and Mongolian Prime Minister Ukhnaagiin Khurelsukh.
The document was signed by Ulziisaikhan Enkhtuvshin, Mongolia's deputy prime minister, and Alexei Miller, CEO of Russian monopoly Gazprom, M2 Presswire reported.
The feasibility of the new route will be determined by experts from the three countries within six months, Russian Deputy Prime Minister Alexei Gordeyev said.
"The deadline is tight," said Gordeyev, according to the Itar-Tass news agency.
"The schedule... is to calculate within half a year and send the proposals to the countries' presidents," Interfax quoted him as saying.
The cross-border route plan was previously discussed by Presidents Putin and Khaltmaagiin Battulga in September during a meeting in the Mongolian capital Ulaanbaatar, said Russia's Sputnik News.
Following those talks, Putin tasked Miller with considering the option of supplying China with yet-to-be-developed Siberian resources from the Irkutsk and Yamal regions on a western route through Mongolia.
"I know the route there isn't easy, but a preliminary consideration of this matter showed that it's absolutely realistic, and our Chinese partners tend to agree," Putin said, according to Interfax. "I ask that you study this issue and report to me."
An accelerated push
The latest movement on the Mongolian option comes just days after Russia opened its massive 3,000-kilometer (1,864-mile) Power of Siberia pipeline, known as the eastern route, on Dec. 2 to supply gas to northeast China and as far south as Shanghai.
The Power of Siberia route is expected to pump 5 billion cubic meters (176.5 billion cubic feet) of gas into China in 2020 and reach full capacity of 38 billion cubic meters (bcm) annually by 2025.
Russia's accelerated push for the Mongolian route represents a doubling down on China's economic growth despite recent "headwinds," relying on its plans to shift more of its energy consumption to cleaner but more costly gas from cheap but high-polluting domestic coal.
But perhaps equally significant is that Russia's embrace of the Mongolian plan appears to spell the end of its earlier drive for a direct western route on a narrow corridor into China through Xinjiang after failing to sell Beijing on the idea for the past 14 years.
Long before starting the Power of Siberia project or considering Mongolia as a second route choice, Putin and Miller argued that it would be quicker, shorter, and cheaper to build a high-altitude pipeline across the remote Altai Mountains, mainly because it would use Russian resources already developed in Western Siberia.
Never mind that the Altai route would pass through a nature reserve and a UNESCO World Heritage Site at an elevation of 2,650 meters (8,690 feet).
Russia also turned a deaf ear to China's arguments that Xinjiang was already well supplied with petroleum resources, as well as pipelines from Central Asia.
For nearly a decade before the Power of Siberia project started in 2014, the Altai route remained Russia's first choice to supply China with 30 bcm of gas annually.
If, as it appears, Russia has finally thrown in the towel on the Altai option, the question is why now?
One possible answer is that the worldwide focus on China's suppression of the Uyghurs in Xinjiang has persuaded Moscow that another big energy import project in the region will never be considered secure.
Never China's choice
Edward Chow, senior associate for energy and national security at the Center for Strategic and International Studies in Washington, said the Altai plan had plenty of problems before the most recent abuses of the Uyghurs came to light.
"The Altai route was never the Chinese choice even before the current Uyghur issues for simple reasons of geography, existing supply from Central Asia, and where the Chinese demand centers are," Chow said.
"It made sense for Russia since it is a short distance on the Russian side and allows Gazprom to direct West Siberian gas to China," he said.
Russia's embrace of the Mongolian route appears to indicate that its calculation of the advantages and disadvantages have changed.
"So, maybe the Russians have given up on the Chinese ever agreeing to the Altai route. Responding to Mongolia's proposal is a nice face-saving way for both sides to move on," said Chow.
In another possible sign of energy security worries about Xinjiang, China has said nothing in the past year about its stalled plan to build a fourth gas pipeline from Turkmenistan on a new Central Asian route to the Xinjiang border.
When the "Line D" route through Uzbekistan, Tajikistan, and Kyrgyzstan was announced with a series of intergovernmental agreements six years ago, the project was expected to be completed in 2016. The target date has since been pushed back to the end of 2022.
Russia's initiative on the Mongolian route suggests that Moscow plans not only to compete with Central Asian gas but also to displace further expansion of supplies from Turkmenistan, taking advantage of energy security fears over Xinjiang.
Russia's push for a second pipeline route may add another layer of competition with China's imports of liquefied natural gas (LNG) at a time when bullish forecasts are being reconsidered due to declining growth in the economy and gas demand.
Transit security risks
But even if worries over Xinjiang have become a determining factor in regional energy route choices, it remains unclear whether they exist in China's strategic planning or only in Russia's perceptions of security risks.
Transit risks are generally considered to increase with each additional border crossing, giving rise to Russia's campaign for direct pipeline routes, such as the controversial Nord Stream 2 pipeline across the Baltic Sea to Germany, which bypasses transit countries including Poland and Ukraine.
One interpretation of Russia's new plan for China is that the addition of a border crossing through Mongolia may now be considered less of a risk than a direct route through Xinjiang.
On the plus side for the Mongolia project, it offers more favorable terrain than the Altai plan. On the minus side, it may require more investment in new Siberian resources than Altai. The relative weight of those factors may become clearer in the coming months.
While China was unlikely to ever accept the Altai proposal, an Interfax report on Dec. 3 appeared to take an apologetic approach to explaining Russia's support for the Mongolia plan in light of Chinese sensitivities.
"The history of the gas industry in the post-Soviet world knows many examples of transit disputes. For that reason, Gazprom has been trying to carry out non-transit (direct) projects for the delivery of gas to major consumers, such as Nord Stream and Blue Stream (across the Black Sea to Turkey)," it said.
The report emphasized that the route choice was initially all Mongolia's idea.
"Mongolia has been proposing that Russia use its territory for the transit of gas to China for years, arguing that this would ensure safety. a short route and convenient geography," Interfax said.
RFA
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World