July 10, 2008

Construction of Kazakhstan-China Gas Pipeline Put at $6 Bln

ALMATY. July 9 (Interfax) - According to early estimates, construction of the Kazakhstan-China gas pipeline will come to $6 billion, the general director of TOO Asia Gas Pipeline, Beimbet Shyakhmetov, told journalists on Wednesday.

"There is still no design and budget documentation for the compressor equipment, automatic controls and auxiliary equipment. However the preliminary cost comes to $6 billion-$6.5 billion. This is for the phase of construction covering the Uzbekistan-Kazakhstan border to Horgos - 1300 kilometers," he said, adding that the overall cost for the gas transportation project between China and Turkmenistan comes to around $20 billion according to estimates.

On Wednesday, around the 42nd kilometer mark of the Almaty- Kapchagai highway a ceremony was held to commemorate the start of construction on the Kazakhstan-China gas pipeline, which will become part of an international trunk pipeline system running between China and Turkmenistan.

It was earlier reported that TOO Asia Gas Pipeline, the operator of the Kazakhstan-China gas pipeline, plans to raise at least $6 billion in loans by this summer repayable in 15 years.

"A CNPC corporate guarantee will be in effect for the first five years," Shyakhmetov said, commenting on the loan plans.

He added that following the pipeline's construction a contract would be signed with Chinese production companies for the transport of gas from Turkmenistan to China under a "transport or pay" regime. Elaborating on this scheme, Shyakhmetov said: "We are minimizing the risks of there being the absence of gas in Turkmenistan, which the Chinese could produce. The same risks for Kazakhstan will be next to zero."

The project's recoupment period will come to 12 or 13 years with funds being raised over a period of 15 years. "There will be no state budget funds [in the project]all funds will be loans," he said.

The project will be implemented in two steps. The first segment of the pipeline will go from the Uzbek-Kazakh border to the Kazakh- China border through Shymkent, the administrative center of the South Kazakhstan region and reach China's Horgos. It will have an annual capacity of 40 billion cubic meters and a length of 1,300 kilometers. The segment will be built in 2008-2009.

The second segment (Beineu - Bozoi - Kzyr-Orda - Shymkent) will have an annual capacity of 10 billion cubic meters and a length of 1,480 kilometers. It will be built if a feasibility study shows its efficiency.

The likely subcontractor for the project on Kazakhstan's part will be KazStroiServis while CPPE (China Petroleum Pipeline Engineering) will fulfill the Chinese end of the deal.

TOO Asia Gas Pipeline was founded in February 2008 on a parity basis between KazTransGaz, a subsidiary of KazMunayGas, and Trans- Asia Gas Pipeline Company Limited. The company is based in Almaty.

The only shareholder of Trans-Asia Gas Pipeline is CNODC, a subsidiary of CNPC.

KazTransGaz was established in 2000 to acquire, operate and service trunk gas pipelines in Kazakhstan. The company controls the main network of gas pipelines with an overall length of 11,000 kilometers and an annual capacity of 190 billion cubic meters.

(c) 2008 Daily News Bulletin; Moscow - English. Provided by ProQuest Information and Learning. All rights Reserved.