Basic Information

Chinese Name: 中亚天然气管道D线
Location: Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan, and China
Type of Project: Energy
Project Developer(s):  Sino-pipeline International Company Limited (subsidiary of China National Petroleum Corporation)
Main Contractor(s): n/a
Known Financiers: China Development Bank
Cost:  6.7 billion USD (estimated)
Project Status: Under construction

Project Outline 

Project Rationale

In its international energy policy, the Chinese authorities have been trying to avoid excessive dependence on a single supplier or a single transit country. With all currently functioning oil and gas pipelines from Central Asia passing through Kazakhstan, Line D will allow Beijing to bypass the Kazakh territory, thus enhancing its bargaining power vis-à-vis Kazakhstan. While part of the Central Asia–China Gas Pipelines, Line D is significantly different from the other three lines for at least two reasons. First, the gas supplied to China via Line D will be extracted from the Galkynish gas field, which happens to be the second-largest gas field in the world after South Pars in Iran. The other three lines extract from the gas fields at Amu Darya Right Banks in Turkmenistan. The development of Galkynish is an indicator of Beijing’s long-term strategic interests in extracting Turkmen gas. Second, Line D is not parallel to the already operational Line A, Line B, and Line C pipelines but follows an entirely different route that sidesteps Kazakhstan.

Route and Capacity

The groundwork for the new line was laid in 2013, when Beijing enticed Turkmen, Uzbek, Tajik, and Kyrgyz authorities to sign agreements on building another major gas pipeline across Central Asia to deliver additional 30 billion cubic metres (bcm) of gas from Turkmenistan to the southern and central parts of the Xinjiang Uygur Autonomous Region of China.

The total length of the pipeline is 966 kilometres, with 840 kilometres of it within Central Asia. The total cost of the project is estimated to be 6.7 billion USD. Unlike the other three lines that bypass Tajik and Kyrgyz territories, the two longest sections of Line D lie in Tajikistan (410 kilometres) and Kyrgyzstan (215 kilometres). Financial resources, qualified personnel, and equipment are primarily supplied by the Chinese side.

Because the Tajik section is the longest and the most challenging segment of the pipeline, in 2014 stakeholders decided to start the construction process from Tajikistan. Running the pipeline through Tajikistan’s mountain range will require the construction of 42 tunnels with a total length of 64 kilometres. In 2016, Uzbekistan’s national oil and gas company Uzbekneftegaz announced that construction was suspended due to technical reasons. Work partially resumed two years later, and in January 2020 a Chinese company contracted for the tunnel-digging reported completion of the first tunnel. No ultimate completion date has yet been announced by the stakeholders.

Legal Regime

Akin to Lines A, B, and C, the legal underpinnings of Line D create a ‘national connected pipelines’ regime, where parties inked their rights and obligations regarding national pipeline sections under intergovernmental and host government (investor-state) agreements.

The ownership model is also mostly the same. The Uzbekistan and Tajikistan sections of Line D are operated through 50-50 joint ventures, Eastern Gas Pipeline LLP (EGP) and Trans-Tajik Gas Pipeline Co. Ltd. (TTGP), respectively. The only exception to the pattern is Kyrgyzstan, where China National Petroleum Corporation’s (CNPC) subsidiary SINO-Pipeline International Company Ltd. established Trans-Kyrgyz Gas Pipeline International Co. Ltd. (TKGP) for the construction and operation of the pipeline. While Kyrgyzstan’s Government authorised its regulator, State Committee on Energy, Industry, and Subsoil, to monitor and assist TKGP’s activities, ownership of the pipeline as well as operation rights are vested solely with the CNPC, its subsidiaries, and affiliated companies, as articulated in Art. 5 of the China–Kyrgyzstan intergovernmental agreement.

Project Impacts 

• Over-dependence: The existing gas supply infrastructure has already turned Beijing into almost the only customer for Turkmen gas exports. Once fully operational, Line D will almost double Turkmenistan’s current obligations of gas supplies to China, from the current 40 billion to 65-70 bcm per year. This will make it impossible for the Turkmenistan authorities to even consider diversifying energy exports without prior negotiations with their Chinese counterparts in the short to medium term. There are also concerns about the feasibility of this increase, as Turkmenistan only managed to deliver 33 bcm of gas to China in 2018.
• Competing gas markets: The energy sectors of all five Central Asian countries were initially designed to operate within a resource-sharing mechanism, in which the downstream countries of Turkmenistan and Uzbekistan supplied gas and thermal electricity to upstream Tajikistan and Kyrgyzstan and, in return, received hydroelectricity and water for irrigation purposes. Increasing gas export to China may affect the recently revived intra-Central Asian energy trade and, as a consequence, the energy security of Tajikistan and Kyrgyzstan, which have no pipeline capacity access rights for Line D despite such a possibility having been discussed during the earlier project negotiations on a bilateral level. Uzbekistan’s opposition to the upstream republics’ access to cheaper gas from Turkmenistan—which would have entailed its own potential economic loss—partly contributed to the suspension of such talks. So far, there is no news about renewed discussions in this direction.
• Energy as a ‘weapon’: Line D pulls together Central Asian upstream (Tajikistan and Kyrgyzstan) and downstream (Uzbekistan) countries, which until recently were political rivals. Challenges to increasing the production of gas in Turkmenistan and political tensions between Tajikistan and Uzbekistan have resulted in the suspension of the construction process, which was partially resumed in 2018. In March 2017, it was reported that Uzbekneftegaz had agreed with CNPC to postpone the construction of the Uzbek section. Political disagreements between Uzbekistan and upstream Central Asian states and the desire to use their transit status to gain political leverage may threaten the reliability of gas supplies via Line D in the future.
• Sovereign debt: Beijing’s commitment to providing financial and technical support is a determinant factor for the interest of the participating parties in the energy project. China is the single largest creditor for a number of Central Asian states, and some of these countries have already reached unprecedented levels of indebtedness to international creditors. For instance, Tajikistan’s debt-to-GDP ratio has risen from 27.5% in 2014 to an estimated 53.7% in 2021, while Kyrgyzstan’s has jumped from 53.6% to around 60.3% over the same period. The cost of the Tajik section of Line D is 3.2 billion USD. Considering the fact that the share of Tajiktransgaz, Tajikistan’s state-owned gas company, in TTGP is financed by loans provided by China Development Bank, the project will further add to the country’s external debt. With Tajikistan already in the highest risk category, growing indebtedness might trigger domestic public discontent. Kyrgyzstan is facing similar challenges: as the sole project operator, the Chinese side agreed to assume responsibility (through TKGP, under Art. 6 of the intergovernmental agreement) for construction costs of the Kyrgyz section of Line D, which are estimated at around 1.2 billion USD, making it one the largest investment projects in Kyrgyzstan.
• Opaqueness: Lack of easily available information around the conditionsof the pipeline construction and operationand the lack of debate on the project benefits for the local and national development contributed to popular anxiety around land ownership and security.In Kyrgyzstan, for instance,due to China’s exclusive ownership andproject financing, transit fees are calculated via a different mechanism. Various news agencies reported that Kyrgyzstan would receive around 2 billion USD in special tax payments for the pipeline exploitation over 30 years. However, as pointed out by the former Vice Prime Minister of Kyrgyzstan Bazarbay Mambetov, the agreement does not clearly state rental charges for transit through the Chon-Alay and Alay areas of the Osh region. Under Annex 1 of the host government agreement with TKGP, Kyrgyzstan’s regulations on transfer pricing will not apply to the Project Company, its branches, subsidiaries, or foreign contractors for the duration of the agreement (the original 35 years + 6 years of extension due to the construction delay). This creates a special transit tax regime, the specificities of which are outlined in the confidential Annex. During the discussion in the Jogorku Kenesh, Kyrgyzstan’s  unicameral Parliament, Mr. Mambetov argued that the country could receive 300 million USD annually for gas transit through its 224-kilometre section, if project conditions were similar to those in Uzbekistan and Kazakhstan—as compared to the current agreement that would only bring Kyrgyzstan 50–60 billion USD annually in transit fees over 32 years. Such opaqueness, added to the 35-year rent on the 810 hectares of land and potential deployment of the Chinese security forces for the project site protection, sparked significant public anxiety in Kyrgyzstan.

In-depth Sources

• AidData Research Lab at William & Mary’s Global Research Institute. Undated. ‘Projects #54370, #39955 (Tajikistan).’ AidData website. Link.
• Aminjonov, Farkhod. 2017. ‘Re-thinking Central Asian Energy Security: Pitfalls of Export Diversification Policies.’ Central Asia Institute for Strategic Studies. Link
• Aminjonov, Farkhod. 2018. ‘Central Asian Gas Exports Dependency: Swapping Russian Patronage for Chinese.’ The RUSI Journal 163, no. 2 : 66–77.
• Aminjonov, Farkhod, Alina Abylkasymova, Anna Aimée, Bahtiyor Eshchanov, Daniyar Moldokanov, Indra Overland, and Roman Vakulchuk. 2019. ‘BRI in Central Asia: Energy Connectivity Projects’. Central Asia Regional Data Review, no. 22: 1–14.
• Hess, Maximilian. 2020. ‘Central Asia’s Force Majeure Fears: Impact of COVID-19 Outbreak on China’s Natural Gas Supply Demands.’ Foreign Policy Research Institute. Link.

Agreements:

• China-Kyrgyzstan intergovernmental agreement
• TKGP host government agreement
• TTGP host government agreement

Updates & Corrections

7 February 2023: The profile has been extensively revised and updated to include information about the legal agreements that underpin the pipelines; an additional point about ‘opaqueness’ has been included in the project impacts. Olesya Dovgalyuk has been added as co-author.