Narrative
Full Description
Project narrative
On June 25, 2009, China Development Bank signed a $4 billion loan agreement with Turkmengaz (the state-owned natural gas company of Turkmenistan) for Phase 1 of the Galkynysh Gas Field and the Turkmenistan Section of the Central Asia Natural Gas Pipeline Construction Project (captured via Record ID#40393). The loan reportedly carried a 7-year maturity and 4.8426% interest rate; it was secured by natural gas exports to China (through a parallel gas sales agreement with PetroChina). As part of the transaction, Turkmenistan reportedly agreed to supply China with up to 40 billion cubic meters/year of natural gas for 30 years (through a long-term gas sales and purchase agreement that Turkmengaz and CNPC signed on July 17, 2007). Turkmengaz agreed to use the revenue it earned from a natural gas supply contract as a source of collateral. The borrower was expected to use the proceeds of the loan to partially finance an EPC contract between Turkmengaz and CNPC, which was signed on December 29, 2009. The purpose of the project’s first phase was to help develop the Galkynysh Gas Field (also known as South Yolotan–Osman Field). Phase 1 also reportedly involved the construction of the Turkmenistan sections of Lines A, B, and C of the Central Asia-China Gas Pipeline (also known as the Turkmenistan-China Gas Pipeline or the Asia Gas Pipeline). These sections measure approximately 188 kilometers in length. CNPC was the EPC contractor responsible for project implementation. Line A of the Central Asia Natural Gas Pipeline was completed and put into operation in December 2009. Line B of the Central Asia Natural Gas Pipeline was completed in October 2010. Line C of the Central Asia Natural Gas Pipeline was put into operation in May 2014. Phase 1 of the Galkynysh gas field project component commenced on February 28, 2011. The 1st gas well was drilled on May 20, 2011. Phase 1 of the Galkynysh gas field project componentwas successfully completed and put into commercial operation on September 4, 2013. In March 2011, China Development Bank signed a loan-for-gas framework agreement with Turkmengaz for Phase 2 of the Galkynysh Gas Field Project. One month later, in April 2011, China Development Bank and Turkmengaz signed a $4.1 billion loan agreement for Phase 2 of the Galkynysh Gas Field Project (captured via Record ID#41905). The loan carried a 10-year maturity, a 3-year grace period, and an interest rate of 4.8855%; it was also reportedly secured by (i.e. collateralized against) natural gas export receipts to China (via PetroChina). The purpose of Phase 2 was to build facilities at the Galkynysh Gas Field that would process 30 billion cubic meters (bcm) per year. Phase 2 entered implementation on May 8, 2014. It was originally expected to reach completion in 2021. As of June 2021, the Government of Turkmenistan reported that it had full repaid both of the China Development Bank loans that were issued for the Galkynysh Gas Field Project (i.e. neither loan had any outstanding principal amount). Media and think tank reports suggest loans may have been repaid via "in-kind" gas supplies to China (Source ID: 212123, 52753, 212124)
Staff comments
1. This project is also known as the South Yolotan–Osman Field Project and the Ioujno-Elotenshoie Gas Field Project. The Russian project title is Газовое месторождение Галкыныш. 2. Some sources refer to a supplementary agreement covering CNPC's exploration and production activities at Bagitiyarlik, where the company had a license to produce up to 30 Bcm/year, and a separate contract through which Turkmengaz agreed to deliver 10 Bcm/year to CNPC. 3. The price at which the natural gas was sold to PetroChina in unknown. This issue warrants further investigation. 4. Some sources suggest that the CDB loan for Phase 1 was worth $3 billion rather than $4 billion. However, the official annual reports from the State Bank for Foreign Economic Affairs cites the value ar $4bn in 2009. 4. Some sources (e.g. https://www.yicai.com/news/2987178.html and http://paper.people.com.cn/zgnyb/html/2013-09/09/content_1295847.htm) suggest that the CDB loan for Phase 2 was issued in September 2013 rather than April 2011. Official Annual Report for 2011 mentions the loan agreement in 2011 at $4.1bn (p. 8). This issue warrants further investigation. 5. The 2009 CDB loan's interest rate (4.8426%) and the 2011 CDB loan's interest rate (4.8855%) are drawn from the World Bank's Debtor Reporting System (see https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0). 6. The April 2006 intergovernmental framework agreement between the Government of Turkmenistan and the Chinese Government regard the Central Asia (Turkmenistan-China) Natural Gas Pipeline Construction Project can be accessed in its entirety via https://drive.google.com/file/d/1QN6NDEerebTPViLbWdQKtMp9i0GhjUAR/view. 7. The construction of the China-Central Asia Gas Pipeline was financed through a series of Chinese loans and equity investments: a $7.5 billion syndicated CDB/BoC loan for Kazakh Section of Lines A and B (captured via Record ID#54489, #91923); a $4.7 billion syndicated CDB/BoC loan for the Kazakh Section of Line C (captured via Record ID#39997, #91926); a $3.5 billion syndicated CDB/BoC loan for the Uzbek Sections of Lines A and B (captured via Record ID#91901, #91917); a $1.4 billion syndicated CDB/BoC loan for the Uzbek Section of Line C (captured via Record ID#54528 #91898); a $300 million CNPC Finance loan for Line D (captured via Record ID#39955); a $300 million equity investment from Trans-Asia Gas Pipeline Company Limited for Line D of the Central Asia-China Gas Pipeline Project (captured via Record ID#70616); and a $4 billion CDB loan for the Turkmenistan Section of Central Asia Natural Gas Pipeline Construction Project (captured via Record ID#40393). 8. The Central Asia-China Gas Pipeline—also known as the Turkmenistan-China Gas Pipeline or the Asia Gas Pipeline—is a 1,873-kilometer long gas pipeline connecting Turkmenistan to China via Uzbekistan and Kazakhstan, which delivers gas equal to approximately 20% of China’s annual natural gas consumption. It consists of 4 lines (A, B, C, and D). Lines A, B, and C run parallel to each other. These three pipelines begin at Gedaim on the Turkmen-Uzbek border, run through central Uzbekistan and southern Kazakhstan, and end at Khorgas in China's Xinjiang Uyghur Autonomous Region. Roughly 188 kilometers of Lines A-C are in Turkmenistan, roughly 529 (or 530) kilometers of Lines A-C are in Kazakhstan, and roughly 1115 (or 1300) kilometers of of Lines A-C run from Kazakhstan to China. Line D, which is still under construction, will be 966 kilometers in length and connect Galkynysh to western China via Kyrgyzstan and Tajikistan. It will originate at the Galkynysh gas field in Turkmenistan.