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Kazakhstan-China Pipeline

The main avenue for delivering Caspian oil to East Asian markets is the Kazakhstan-China oil pipeline, built through a joint venture between the China National Petroleum Company (CNPC) and Kazakhastan's KazMunaiGas in 2009. The pipeline was upgraded to accommodate expected oil from the Kashagan oil field. The Turkmenistan-China gas pipeline, commissioned in 2009, transports up to 1.4 trillion cubic feet of natural gas per year from Turkmenistan to China's Xinjiang region. Kazakhstan plans to link this pipeline to its own production sites to export more natural gas to China. The Kazakhstan-China oil pipeline spans 1,384 miles, running from Atyrau port in northwestern Kazakhstan to Alashankou in China's northwest Xinjiang region, and initially had a capacity of 240,000 bbl/d of crude. The pipeline was expanded, which increased its capacity to 400,000 bbl/d. The additional capacity will be used to transport at least some Kashagan oil. The pipeline is a joint venture between CNPC and KMG.

The pipeline was built in segments. The first section of the Kazakhstan-China pipeline was completed in 2003 and runs across Western Kazakhstan from the oil fields of the Aktobe region to the oil hub Atyrau. Construction began on the second segment of the Kazakhstan-China pipeline in late September 2004. The 613-mile-long pipeline from Atasu, in northwestern Kazakhstan, to Alataw Pass in China's northwestern Xinjiang region was to be completed in December 2005. The second stage of this project had an estimated cost of $850 million.

The most recently completed segment, the 492-mile Kenkiyak-Kumkol (Phase 3) started commercial operations on October 6, 2009, and connects the Kenkiyak-Atyrau pipeline (Phase 1) to the Atasu-Alashankou pipeline (Phase 2), online since 2006. The cross-border section connects to CNPC/PetroChina's crude oil pipeline system in northwest China. Phase 1, the Kenkiyak-Atyrau pipeline, was the first oil pipeline built in Kazakhstan after independence. This line was tied into the Kazakhstan-China pipeline and its direction of flow was reversed, now running from Atyrau to Kenkiyak.

The Kazakh and Chinese national oil companies are jointly financing the project, yet the Chinese oil company will be responsible for filling the pipeline from its oilfields in Kazakhstan once it is finished. The quantity of crude oil supplied to China through this route will still represent only a small percentage (i.e. less than 5%) of China's expected oil demand by the time the project reaches completion.



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