China, Kazakhstan strengthen energy ties with new gas and oil agreements

China National Petroleum Corporation and Kazakhstan's national gas company, KazTransGas, signed a supplementary agreement to their existing natural gas supply contract on Feb. 11 in Astana, Kazakhstan. The agreement increases the contracted gas volume for the 2024-25 supply year by one-third compared with the existing contract, China state-owned Xinhua News Agency said on its social media platform, Weibo, later in the day.

Xinhua did not disclose specific contract volume figures.

On the same day, CNPC also finalized a crude oil spot purchase agreement with Tengizchevroil LLP, a major oil producer in Kazakhstan, further expanding their collaboration in the oil trade sector, according to Xinhua.

These agreements were part of a broader four-day economic mission from Feb. 10-13, organized by the China Council for the Promotion of International Trade. The mission brought together over 30 Chinese companies from sectors including finance, energy, infrastructure, and smart manufacturing to explore partnership opportunities in Kazakhstan, Xinhua added.

The signing of these agreements underscores the growing energy partnership between China and Kazakhstan, two key players in the Belt and Road Initiative.

China-Kazakhstan gas trade

Kazakhstan has long been a vital natural gas supplier to China through the Central Asia natural gas pipeline under a five-year agreement signed in 2018, which committed to annual gas deliveries of 10 Bcm.

However, exports fell short due to domestic shortages and infrastructural bottlenecks. According to the state-run Kazinform International News Agency, only 4.4 Bcm were supplied in 2022 and 5.86 Bcm in 2023. During the winter months, exports were temporarily halted to prioritize domestic needs, with 19.4 Bcm of the 29.8 Bcm of commercial gas produced in 2023 consumed domestically.

Despite these challenges, Kazakhstan remains committed to its gas supply plans for China. In October 2023, Kazakhstan's state gas company, QazaqGaz, signed an agreement with CNPC's wholly owned subsidiary PetroChina to extend gas supply until 2026.

As China's third-largest pipeline gas supplier after Russia and Turkmenistan, Kazakhstan exported an estimated 3.81 million mt gas via the Central Asia Natural Gas Pipeline in 2024, a slight increase from the previous year, data from S&P Global Commodity Insights showed. This volume accounted for 6.9% of China's total pipeline gas imports, which were approximately 55.04 million mt last year.

Kazakhstan aims to increase its total gas production to 91 Bcm by 2030, which could help sustain its gas exports to China, Kazinform said.

To support this goal, Kazakhstan is accelerating the construction of four gas plants by 2030, including facilities at Kashagan and Karachaganak fields, with a combined annual capacity of 84 bcm, according to Kazinform.

Additionally, Kazakhstan plans to increase its pipeline transportation capacity by constructing a pipeline parallel to the Beineu-Bozoi-Shymkent natural gas pipeline by 2026-27, Kazinform said, adding as a vital segment of the Central Asia-China pipeline, the existing pipeline currently has a capacity of only 15 Bcm/year.