Gazprom will go to China by steppes

Sergey Kondratiev, Deputy Head of the Economic Department of the Institute for Energy and Finance, commented to the Kommersant newspaper on the Russian gas supplies to Central Asia.

Kazakhstan and Russia are discussing the construction of several gas pipelines for gasification of the north-east of Kazakhstan and export to China. In particular, options for pipes from Omsk or Barnaul to Alashankou are being considered. The Kazakh side sees the main problem in the cost of Russian gas, since tariffs in Kazakhstan are significantly lower than domestic ones.

As Sergey Kondratiev notes, regulated prices in Kazakhstan remain low and it is unlikely that the government will be ready to raise them sharply in the gasified regions. Thus, wholesale gas prices for commercial consumers in most regions of Kazakhstan are $50-55 per 1 thousand cubic meters, which is 25% lower than prices for consumers in the Omsk region. "I think Gazprom is unlikely to agree to supplies at prices below $120-150 per 1 thousand cubic meters," the expert says. In his opinion, the government of Kazakhstan can go to direct subsidizing of supplies, but this will require significant resources, therefore, as an alternative, a scheme with the organization of gas supplies from Russia to Kazakhstan in exchange for pumping in the direction of Uzbekistan and China (including within the framework of swap agreements) can be used. The expert estimates investments in full-scale gasification of the central and eastern regions of Kazakhstan at more than $2 billion.