A surge in China's gas imports from Central Asia may sink Russia's chances to land a competing energy deal with Beijing.
On Nov. 30, China reached an agreement that would more than triple its imports from Turkmenistan over this year's planned level "in the near future," state media reported.
The deal signed by President Hu Jintao and Turkmenistan President Gurbanguly Berdymukhammedov would boost gas deliveries to 65 billion cubic meters (bcm) per year from the current commitment of 40 bcm and this year's planned imports of 17 bcm.
The volume represents about 60 percent of China's total gas consumption in 2010. The increase is expected in 2014-15, Russia's daily Kommersant said.
"Turkmenistan regards China as a priority partner, with which relations are being built on a strategic basis and for the long term," said Berdymukhammedov, according to the Interfax news agency. The two sides "are working on further growth in supplies of Turkmen gas to China," he said.
The deal signed during Berdymukhammedov's four-day visit to China marks another major step in regional energy trade since the 2,000-kilometer (1,242-mile) Central Asian Gas Pipeline from Turkmenistan opened in December 2009.
At a ceremony in the coastal city of Shenzhen, the Turkmen leader hailed the arrival of gas in Guangdong province on China's second West-East Pipeline, a route stretching an additional 4,945 kilometers.
Edward Chow, senior fellow for energy and national security at the Center for Strategic and International Studies in Washington, said that gas at the eastern end of the line may not actually be from Turkmenistan, but the length is impressive nonetheless.
Bypassing Russia
The agreement for added supplies also stands in sharp contrast to China's stalled talks on gas imports from Russia, which have dragged on for years.
Since 2006, Russia's Gazprom has missed a series of deadlines for a deal to deliver 68 bcm per year to China through two pipelines from Siberia.
Despite many hopeful statements, the two sides have been unable to agree on a price. But Chow said price is not the only problem. Turkmenistan has been open to China's investment in its energy sector, while Russia has been relatively closed.
"The difference is that the Chinese perceive they are welcome in Turkmenistan, and they're not in Russia," Chow told RFA. "In Russia so far, those kinds of equity opportunities are not available to China. So, from the Chinese point of view, the two supply sources are fundamentally different."
But Gazprom seems to be sticking with a "take it or leave it" position in talks with China National Petroleum Corp., the state-owned company which is also importing from Central Asia.
"Our partners know our offers," Gazprom CEO Alexei Miller told Interfax when asked if he would lower Russia's price demands in response to Turkmen competition. The new agreement "will not affect our conditions in any way," he said.
Chow questions whether Gazprom's bargaining stance will serve its long-term interests, given worldwide developments in tapping shale gas reserves and pressures to break the price link to oil.
Russia has been demanding the equivalent of European prices for gas supplies to China with adjustments for distance and transport costs. The arguments have only succeeded in elevating Central Asia's appeal.
"They haven't made a lot of headway in recent years, in spite of very strong rhetoric stating their intention of expanding into China," said Chow.
The rapid growth in imports from Turkmenistan suggests that China may be planning to do without Russian gas altogether.
"From the short to medium-term point of view, I think that's the conclusion China has reached," Chow said. "They don't so desperately need Russian gas that they should make a lot of concessions today, which is why there's no agreement."
Even in the longer term, there are signs that China can meet its needs without Russian gas.
In its annual World Energy Outlook, the Paris-based International Energy Agency predicts that China's demand for the clean-burning fuel will soar to 435 bcm per year in 2030.
But according to a new forecast from the Ministry of Land and Resources, China's domestic production will hit 300 bcm by then, which leaves a relatively small gap to be filled by imports from Central Asia and other sources, including liquid natural gas shipments from overseas.