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October 2017
PEER REVIEWED / REFEREED RESEARCH JOURNAL
A Premier Indo-Centric Foreign Affairs Journal Since 1980
Geopolitics of Energy
in Central Asia
Mackinder’s ‘Heartland’ theory & the New Great Game
Critical Assessment of Central Asia’s Energy Potential
Varied Interests of Regional & Global Players:
Competition & Co-operation
Challenges Ahead: Opportunities for India
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Year of Publication
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EDITORIAL
Central Asia has been cradle of civilization. It has also been a meeting ground of
various cultures - Slavic, Sinic, Turkic, Persian, Arab and Indian. As a crossroad
between East, West, North and South, it has enjoyed a uniquely important location
in Asia and served as the route for exchange of goods and merchandise as well as
religion and culture. Mackinder’s notion of Eurasian ‘Heartland’ was just a
conceptualization of its significance. Not surprisingly the region has been an
arena of geopolitical and geo-economic contestation among great powers. It
witnessed confrontation between the British and the Russian Empires in the
nineteenth century, popularly known as Great Game. It was part of Tsarist Russia
PEER REVIEWED / REFEREED RESEARCH JOURNAL
and Soviet Union for more than a century, which brought fundamental changes
Volume XXXVIII Number 10 October 2017 in the political, economic and socio-cultural life of the area. The Soviet
disintegration in 1991 lead to the emergence of not just five independent countries,
but a new geopolitical region in the global politics. The five countries went
G . Kishore Babu
through difficult transition from a state controlled command economy to a
Editor market economy and from a one party system to various shades of political
regimes, which have successfully maintained a largely stable and secular polity
Bhabani Dikshit and followed balanced and nuanced foreign policy. Surrounded by two great powers
Managing Editor Russia and China, under the shadow of unstable and terrorist prone Af-Pak region
and in the vicinity of Iran and the Arab world, the achievements of the Central
Stuti S. Mandala Asian countries can be described as commendable.
Associate Editor The journal World Focus has strived to contribute to the academic discourse with
Indo-centric international affairs. This special issue of the journal is on
‘Geopolitics of Energy in Central Asia’. It presents selection of articles by
WORLD FOCUS takes up every month one experts, scholars and researchers. Deliberating on energy related issues in Central
international issue and gives an analysis of its various Asia, the articles touch upon varied interests of regional and global players in
aspects by persons well known for their Central Asia - competition as well as cooperation. Central Asia’s energy potential
specialisation in the subject. The issues covered are has been critically assessed and the challenges that lie ahead have been highlighted.
topical or near topical, but of an abiding interest. India’s possible options in finding fruitful engagement with the Central Asian
states are dealt with. Some non-traditional themes have also been covered. The
The analysis is simple enough to interest even an
impact of oil-gas based economies on environment and society has been discussed.
initiate to world affairs, but without sacrificing depth.
Central Asia is endowed with significant resource of oil and gas, primarily available
The aim is to present an Indocentric view on a
in Kazakhstan and Turkmenistan, and Uzbekistan, to a lesser extent. Though it
particular issue currently facing the world.
is no match for the oil and gas resources of the Persian Gulf, the Central Asian
Opinions expressed in the articles are personal views region is important as alternative sources of energy, and because of its proximity
of the author and in no way reflect the opinion of to the large energy consumers (China, Europe and India). This has made it the
World Focus. The author is solely responsible for focus and locus of diverging interests of the big powers. Russia had dominance
the contents in his/ her article and the World Focus over Central Asia’s energy market. It was through Russian pipelines, that the oil
takes no responsibility in this regard. and gas of Central Asia were transported to Europe, even in the post-Soviet era.
The Contents of this magazine cannot be reproduced With the rise in energy prices and significant investment in infrastructure related
in any form with out prior permission from World to the energy sector, the region witnessed a relatively stable economic growth.
Focus. Any legal issues pertaining to World Focus The countries tried to reduce their dependence on Russia, and went on to forge
will be settled in NCT region of Delhi only. energy ties with other countries. China has become major importer of oil and gas
from the region. It has also invested extensively in the energy related
Unsolicited articles will not be returned or
infrastructure in the region. The US involvement, unlike the other major powers,
acknowledged. World Focus reserves the right to is more because of its strategic interest. The growing trend towards the renewable
edit articles for brevity and clarity before publication. sources of energy has also gained prominence in the region. Central Asian states
have significant potential of hydroelectricity. Tajikistan and Kyrgyzstan, being
Edited, Owned, Published and Printed by upstream countries, are the major hydroelectricity suppliers.
G. Kishore Babu from B-49 (Ground Floor), Joshi Colony, I.P. India despite having strong cultural and historical ties, has failed to make a
Extension, Delhi-110092 at Madhav Press, 4857/24, First Floor,
significant presence in the region (much of it can be attributed to the lack of
Ansari Road, Dariyaganj, New Delhi - 110002
direct land connection). There has been limited Indian investment in the Central
Total number of Pages 132, including Covers Asian energy market. Thus India is in no position to challenge the dominance of
China and Russia in the region. For better connectivity and to access the gas
reserves of the region there are two ambitious projects - International North
Copy Right : World Focus
South Corridor (INSTC) and the Turkmenistan-Afghanistan-Pakistan-India
Our Address:
(TAPI) pipeline. How fast the former can be operationalized and becomes
World Focus economically viable and whether the latter will see the light of the day are moot
B-49, (Ground Floor) Joshi Colony, questions.
I P Extension Finally I thank all the paper writers for contributing to the special issue and the
publishers for giving me this opportunity. I hope readers will find this issue
Delhi - 110092, India
interesting and informative.
Tel. / Fax : [phone], Mobile No. 8130754555
New Delhi Prof. Sanjay Kumar Pandey
Email: [email protected]
October 2017 Guest Editor
Website: www.worldfocus.in
3
u e
al Iss Geopolitics of Energy in Central Asia
peci
S Contents
Changing Global Energy Dynamics and Role of Central Asia
Pooja Sharma & Nandakumar Janardhanan...............................................................................5
Economic Development & Energy in Central Asia
Prof. Gulshan Sachdeva..........................................................................................................12
Geopolitics of Pipelines in Central Asia
Dr. Angira Sen Sarma.............................................................................................................17
Central Asian Energy in India’s Quest for Energy Security
Ajay Pratap Singh & Prof. Sanjay Kumar Pandey.....................................................................23
Harnessing Hydel Power Potential of Kyrgyzstan and Tajikistan:
Challenges and the Way Ahead
Prof. Nirmala Joshi.................................................................................................................29
TAPI Gas Pipeline and Regional Cooperation
Prof. Phool Badan..................................................................................................................35
Uzbekistan’s Energy Policy: Issues and Challenges
Dr. Kamala Kumari................................................................................................................41
Current State of Energy Sector in Kazakhstan
Ainagul Smetova....................................................................................................................47
Russia’s Energy Policy towards Central Asia
Dr. Sanjay Deshpande............................................................................................................52
The Politics of Energy and China’s Engagement in Central Asia
Dr. Ankur Yadav....................................................................................................................58
U.S. Energy Strategy in Central Asia
Dr. Rakesh Yadav..................................................................................................................66
Alternative Sources of Energy in Central Asia
Dr. Raj Kumar ......................................................................................................................71
Environmental and Social Consequences of Oil Geopolitics in Central Asia
Sutandra Singha.....................................................................................................................77
The GIS Analysis of Afghanistan Conflict on Central Asian Energy Routes for South Asia
Sudhir Dara & Ambrish Dhaka...............................................................................................83
India and Central Asia Relation: Expanding the Energy Potential
Subas Chandra Sethy..............................................................................................................92
Russian-Chinese Energy Dynamics in Central Asia
Dr. Manabhanjan Meher.........................................................................................................98
Petropolitics and Pipeline Diplomacy in Central Asia:
Where does India stand in this Game?
Dr. Ramakrushna Pradhan....................................................................................................104
India and Central Asia: An Enduring Partnership in Energy Security
Dr. Jyoti Singh and Dr. Sunil Kumar.......................................................................................115
The New Great Game:
The Great Power Rivalry and the Politics of Oil in Central Asia and South Asia
Shahnawaz Qadri.................................................................................................................116
Iran in India’s Energy Quest to Central Asia
Jayasree Nath......................................................................................................................122
4 World Focus October 2017
Changing Global Energy Dynamics and Role of Central Asia
Pooja Sharma & Nandakumar Janardhanan
1 Introduction1 turned out to be critical milestones that influenced
The post-World War II period witnessed significant shaping of newer directions in the energy policy of
transformation in the global energy sector, where countries.
petroleum sources emerged as a synonym for energy
in the political debates. The first oil shock and the The changing dynamics of global energy
subsequent disruptions to the global petroleum supply market reflect that many consumer countries are
following the Arab Oil Embargo and the political reshaping their policies to minimise the dependency
turbulence in the Persian Gulf region made energy on conventional fuels which play a critical role in the
as one of the top agendas in the public policy making economic activities. Diversification of supply regions
in many of the import dependent countries. The as well as supply sources are important policy steps
following years witnessed several changes in the taken by major consumer countries. Despite these
energy policy initiatives globally. Though the concerns and policy initiatives, it is largely perceived
challenges to energy import initially made ways to that fossil fuels will continue to hold a larger share of
think of eliminating oil imports altogether in western the global energy mix. While Middle East will remain
world, it was soon replaced with the less stringent to be the major supplier to energy market, the potential
but more complex approach of limiting economic of other supply regions are also of interest to global
vulnerability to oil imports (Bohi & Toman, 1996).To energy market. In this context, the countries in the
run the economic activities in many countries fossil Central Asian region are seen as major suppliers of
fuel emerged as merely unavoidable. petroleum sources. Apart from several pipeline supply
routes that link Central Asian states and the consumer
The beginning of 21st century witnessed major countries, further expansion possibilities are also
shift in the way energy security was perceived and examined as the region gains prominence in the global
policies were planned. In the case of demand, the energy market. This paper aims to survey the global
shift in the centre of gravity to fast-growing energy dynamics and the role played by Central Asia
developing economies, led by China and India; in determining the newly emerging equations balancing
together with a slowing in overall energy growth as it the energy supply and demand across globe.
is used ever more efficiently. And on the supply side,
the secular movement towards cleaner, lower carbon 2 Changing Global Energy Dynamics 2
energy sources, led by renewable energy, driven by Energy is prerequisite for growth and development.
technological advances and environmental needs (BP, ‘The world population is projected to reach
2017a).’ After China became a net importer of oil in approximately 8.8 billion people by 2035 and world
1990s the surge in global demand put further pressure economy is expected to almost double in next twenty
on the international energy market. Price of crude oil years, exhibiting an average growth of 3.4% per
that was $28 per barrel in 2003 skyrocketed to $ 147 annum (BP, 2017a).’ Consequently this growth in the
per barrel by 2008, damaging many of the import world economy will be accompanied by energy
dependent countries’ domestic economy. In the first demand mainly created by the fast – growing,
half of the last decade, United States’ war on terror emerging economies. ‘Most of the expected growth
following the terrorist attack on WTC, invasion of of global economy is driven by emerging economies
Iraq, the political turbulence in the Persian Gulf region like India and China almost accounting for half of the
as well as issues such as workers strike in the total increase. The corresponding energy demand is
production facilities in Norway, natural calamities that expected to increase by 30% owing to the fall in energy
affected gulf of Mexico production facility have all intensity3 (BP, 2017a)’.In the global energy mix, gas
Changing Global Energy Dynamics and Role of Central Asia 5
is considered as the fastest growing fuel in demand of Iraq in the early years of last decade was already
up to the period of 2035, growing at a rate of 1.6 chocking global energy supplies. The increasing
percent per annum, while oil demand will continue to demand for petroleum was also due to corresponding
grow at 0.7 percent per annum. ‘Demand for coal is increase in demand by the industry as well as
expected to reach its peak by 2020 while renewable transportation sector. Also, in 2003 China overtook
energy will be the fastest growing source of energy Japan to be the second largest Oil consumer, only
with approximately 7.1percent with its share rising to after the United States. This also led to speculation
10% by 2035. (BP, 2017b)’. ‘At the same time oil, that China will consume all the oil in the market and
gas and coal remain the dominant sources of energy that, projecting Beijing’s increasing demand as a
providing an engine of growth in the world economy, challenge to the energy security of other nations. The
accounting for more than three-quarters of total subsequent years also witnessed several important
energy supplies in 2035 (BP, 2017b)’. changes in the Global energy market. Impacts of
hurricane Katrina on the oil facilities in the Gulf of
Today the global energy market is at Mexico, workers strike in Norway, problems of oil
crossroads as it faces multiple constraints and and gas industry faced by Venezuela have all brought
challenges with regard to supply and consumption. further stress on Global energy supplies in the last
To list a few challenges faced by global energy sector: decade. This eventually led to increase in price of
a) geopolitical constraints on energy supply systems, energy. The price of oil which was $28 per barrel in
b) concerns about energy related environmental 2003 reached over $140 per barrel in 2008, causing
issues and demand for balancing energy and serious impact on the energy bill of import dependent
environmental goals, c) demand for clean energy countries (NASDAQ, 2017).
despite the lack of adequate technological support,
d)need for huge investment in conventional energy The already turbulent Persian Gulf energy
sector to keep up the supply levels; and e) the market witnessed further challenges with the ‘Arab
unexpected shock to the resurgence of global nuclear Uprising’ by the end of last decade. However many
energy sector following the Fukushima nuclear expected that nuclear energy could possibly be an
accident in Japan. alternative in meeting the increasing demand for
electricity in both developing as well as developed
The last two challenges have not only raised world in the back drop of the challenges faced by
concern in the countries which are directly affected, conventional fuels. But this expectation did not last
but also among the economies that do not even have long as the year 2011 witnessed one of the most tragic
any geographical proximity to the affected regions. incident in the history of nuclear energy generation
As a result, many foresee potential changes in the with the accident of Fukushima nuclear facilities,
future energy policies of countries arising from the following the earthquake and Tsunami. While Japan
need to cope up with the changing global energy has successfully shut down on the nuclear reactor
dynamics. and managed to meet most of it energy demand from
oil and Gas supplies, this was adding up another
Traditionally the Middle East and Africa enjoy pressure on the country in terms of energy related
great importance in the global energy landscape.’ emissions. Globally several nuclear facilities
Together these two regions account for more than underwent stress test to check the integrity of security
52 percent of global oil reserves and about 50 percent and safety systems, while certain other countries also
of global natural gas reserves (BP, 2017a)’. It is also made plans to shut down their nuclear facilities.
important to note that any significant interruption to Germany expect to completely cut of its dependency
the oil and gas supply infrastructure in these two on domestic nuclear facilities. To understand the
regions could pose major challenge to the energy future energy market scenario it is crucial to
security of global economies. investigate the existing global reserves and supply
potential.
The Global energy market went through an
eventful period in the last decade. America’s invasion
6 World Focus October 2017
2.1 Global Reserves and Supply Potential of world primary energy status reveals that the world
The commercially traded primary energy consumption has enough reserves of primary energy sources to
in the world indicate that energy mix is dominated by meet the future demand of energy.
fossil fuels account for more than 85 percentage. In
terms of production, the Middle East and African 3 Central Asia in the Global Energy Context
region together account for majority of the production ‘Central Asia, though referred to as a single region,
and supply of petroleum sources. In case of coal, a consists of five culturally and ethnically diverse
decline in production as well as consumption has been countries that have followed different political and
witnessed over the past few years. This decline is economic transformation paths in the two and a half
basically due to energy transition to cleaner sources decade since independence from the Soviet Union
in many parts in the world. (Batsaikhan & Dabrowski, 2017) ‘. The five former
Soviet republics, -Uzbekistan, Turkmenistan,
‘With regard to oil reserves, the world oil Kazakhstan, Tajikistan and Kyrgyzstan are key
reserves have more than doubled in the past 35 years. players in global energy market. The reserve
A total of 1.7 trillion barrels or about 65% of the total production ratio indicates the years of production
resources are located in regions including Middle East, possible at the current level of output. Today, ‘the
CIS and North America (BP, 2017b) ‘. Owing to reserve production ratio (R/P ratio) for oil is 49 years
abundance of oil resources along with significant low for Kazakhstan, 6.3years for Turkmenistan and 29
oil demand, the global oil market is expected to undergo years for Uzbekistan, which is not significant as
change in the composition. One of the most important compared to Middle Eastern sources. In terms of
trend witnessed for the past few years is that, due to natural gas, these countries have 48.3 years, 261.6
the low cost in production of oil and gas, many of the years and 17 years which looks much more attractive
producing countries are witnessing high consumption than the oil sector (BP, 2017a)’. This indicates that
of the sources. Middle East has witnessed the region has a potential to supply petroleum sources,
remarkable increase in terms of petroleum especially natural gas to the international market.
consumption. It is also expected that some of the However, many external energy giants play in decisive
major importers of Petroleum energy are likely to role in Central Asia’s energy market.
become net exporters in the years ahead. Many often
point out the example of United States as a possible ‘The importance of the Central Asian region
net exporter of gas in the coming years. as a potential supplier of energy is specifically due to
its geographical location between the two large energy
In terms of gas, Asia remains the largest consumers in the world, namely China and Europe
destination of LNG supplies, as the demand for gas (Janardhanan, 2009).’ However, traditionally, Russia
increased substantially in China, India and other Asian has been playing a key role in the energy sector in
economies. ‘Current estimates show that ‘coal the Central Asian region primarily due to its Soviet
reserves are sufficient to meet 153 years of global era ties. It is often stated by experts ‘that the main
production. However, it is widely noted that the supply external power with an impact on Central Asia was,
and demand of coal is going to fall in the years ahead. is and will be Russia, through its economic, military
The world coal production fell by 6.2%, and and cultural influence, and also through the great
consumption fell by 1.7% in the years 2016 from that number of ethnic Russians in the region’ (Lakatos,
in the previous year (BP, 2017b)’. This is primarily 2014)’. While the Russian monopoly over the
due to the fact that, several policy initiatives to distribution pipeline network to Europe had limited
incorporate more and more clean energy into the Central Asia’s direct access to the import dependent
supply systems have been gradually limiting the use countries in the west, the eastern energy emerged as
of coal. important market to the Central Asian countries.
The above observations emphasise on the ‘For decades, Central Asia’s energy
existing status and potential of primary energy supply infrastructure remained underdeveloped, with
and demand in the global energy market. An overview producers in the region struggling to transform their
Changing Global Energy Dynamics and Role of Central Asia 7
raw natural resources into output, while also having Asia vs. World
difficulty finding reliable methods of delivery (Hart,
2016).’ The energy industry in this region has been
largely dependent on the Russian pipeline network
for supply and distribution to customers. ‘Even today,
many pipelines supplying energy to Europe connecting
Central Asian and Caspian states are owned by
Russian Oil companies (Janardhanan, 2009)’. Despite
Russian dominance over the region’s energy market
which significantly affected its energy sector
development in the past, it appears to many that
unwillingness of the Central Asian countries to export
oil and gas through Russian controlled pipelines has Source: BP Statistical Review of the World Energy , June 2017
also elevated the significance of the customers in the Note: Only leading producers (Kazakhstan, Turkmenistan,
Uzbekistan) in the region are considered in this figure
eastern market, mainly China. In the recent years
Central Asia is increasingly seen as potentially The above data reflects that the region of Central
important supplier of oil and gas as there is a Asia has substantial natural gas reserves however,
remarkable increase in the findings of oil and gas to understand if the reserves available currently is
fields. ‘This turnaround in fortunes has been driven sufficient enough to have long term energy trade
largely by a shift in outlook, with a new focus on the require analysis based on the energy production and
new energy-hungry markets which surround Central consumption trends in future.
Asia: China and its 1.4 billion people to the east; India
and its 1.3 billion people to the south. (Hart, 2016).’ 3.1 Petroleum Reserves and Production:
Quantitative Analysis
Table 1: Oil Scenario in Central Asia in 2016 As Central Asia is believed to have the potential to
Country Oil reserves Reserve and Production in Consumption in Refinery play a substantial role in the global energy market as
(1000million Production 1000 barrels 1000 barrels capacities
a supplier, this section conducts a quantitative analysis
barrels) (1000 (R/P ratio) per day per day (1000 barrels
million tonnes) (million tonnes) (million tonnes) daily) to understand the same. The analysis aims to forecast
Kazakhstan 30 (3.9) 49 1672 (79.3) 287 ( 13.2 ) 350 the energy scenario with regard to consumption,
Turkmenistan 0.6 ( 0.1) 6.3 261 (12.7) 148 (6.7) 271 production and export potential for the next thirty
Uzbekistan 0.6 ( 0.1 ) 29.3 55 ( 2.6 ) 58 (2.8) 232
years. This study uses Holt’s Linear trend Method
Source: BP Statistical Review of the World Energy , June 2017
which is a simple exponential method. After running
Note: Only leading producers in the region are considered in this table
the model using SPSS statistical package using the
Table 2: Natural Gas Scenario in Central Asia in
data from British Petroleum, it is observed that the
2016
results indicate a continuous rise in demand for
Country NG reserves Reserve and Production in Consumption in
(Trillion cubic Production billion cubic billion cubic primary energy in Central Asian region in next 30
metres(tcm) (R/P ratio) metres (mtoe) metres(mtoe) years of period. This is a very crucial information
(Trillion cubic
feet tcf) regarding the production of oil and gas in next thirty
years in the region. On the other hand the forecast
Kazakhstan 1 ( 34) 48.3 9.9 ( 17.9) 13.4 ( 12)
for natural gas production shows a steep rise in the
Turkmenistan 17.5 (617.3) 261.7 66.8 ( 60.1) 29.5 ( 26.6 )
Uzbekistan 1.1 ( 38.3) 17.3 62.8 (56.5) 51.4 ( 46.2 ) coming years, indicating a strong potential in exporting
the natural gas sources. However, with regard to coal,
Source: BP Statistical Review of the World Energy , June 2017
Note: Only leading producers in the region are considered in this table the production trend reflect a status quo for the period
up to 2030.
These countries in central Asia currently possess only
about 9 percent of total natural gas reserves and about
Figure 2: Oil production forecast (See Next Page)
2% of oil reserves available in the world.
Figure 1: Natural Gas and Oil reserves in Central
8 World Focus October 2017
countries is expected to grow in the years ahead.
This information is also crucial as one looks at the
export potential of Central Asian countries. The
current trend of primary energy consumption
continues show that a significant share of domestically
produced oil and gas will need to be directed to meet
the growing demand from the domestic arena. This
in turn can question the capacity of the region to
Source: British Petroleum “Statistical Review of the World Energy 2017 supply to a larger network of overseas customers.
4 Can Central Asia be a major player in the
The data analysis indicates that the oil production will
global energy market?
witness a continuous decline in next thirty years if
The question of whether Central Asia will gain
the current trend continues. This observation is based
prominence in the global energy market will largely
on the fall in production that has been witnessed in
depend on three aspects. First, whether the energy
the recent years in the three countries in Central Asia.
resources available in the region can help establish a
long term customer base in the international market,
Figure 3: Natural Gas production forecast
second, will the currently available supply lines
sufficiently connect Central Asian region with the
global Market, and third, will the global market
continue to have a demand for oil and gas resources.
4.1 Central Asia’s supply options to East
Several energy transport corridors play a key role in
linking Central Asia with the rest of the world, the
most important ones are the transport corridors with
Europe, China and the planned links with India. During
the Soviet era majority of energy produced in Central
Asia were sent northwards as Russia has been
Source: British Petroleum “Statistical Review of the World Energy 2017 monopolizing the region energy trade. Diversification
The model evince that coal production in the coming of energy trade was supported mainly by the extra
years will continue to remain the same. According regional powers like the United States and some of
British Petroleum, the world’s coal consumption will the leading European economies who feared a
peak in 2020, while the world’s coal production already continuing Russian monopoly will affect their interest
fell by 6.2% in 2016 primarily due to the fall in coal in the region. ‘Even as countries in the Caspian
production by 7.9% and the fall production of coal in sought to strengthen their newfound political and
US by about 8.8%. economic independence by inviting Western oil
companies to rapidly develop the region’s oil and gas
Figure 4: Primary Consumption forecast
potential, these same major oil companies saw using
the old Soviet pipeline system as the easiest way to
evacuate their initially low volumes in order to defer
capital expenditure on new transportation
infrastructure’ (Chow & Hendrix, 2010)’.
Several attempts also being made to enhance
the energy trade relations of the regions with Asian
counterparts. ‘Some of the initiatives date back several
decades, as in the case of the Asian Land Transport
Infrastructure Development (ALTID), launched
Source: British Petroleum “Statistical Review of the World Energy 2017 under the United Nations Economic and Social
It is especially important to note that the
Commission for the Asia- Pacific (UNESCAP) in
consumption of primary energy in Central Asian
Changing Global Energy Dynamics and Role of Central Asia 9
1992 (Contessi, 2016)’. China’s Global search for of gas every day, to be shared between Pakistan and
energy has opened up greater opportunities for the India (ET, 2016). The pipeline construction plans have
central Asian region in terms of energy export through witnessed several challenges from the inception as
pipelines. During the ‘Soviet era, China’s policy security pertaining to the pipeline route was seen as
towards the Central Asian countries was mainly a critical challenge due to two factors. First the terrain
focusing on border delineation issues, and the ethnic that link India with Central Asia is considered as
issues in the Xinjiang Uygur region. Subsequently, geographically difficult making any pipeline laying plan
significance of economic relation between People’s expensive. Secondly considering the fact that security
Republic of China and Central Asia grew considerably situation in Pakistan and Afghanistan are vulnerable,
as Beijing started to focus more on the region’s energy concerns have been raised about the security of the
reserves and also at the possibility of linking up to pipeline by observers. It has been observed that
other Middle East energy sources’ (Janardhanan, pipeline construction through this region would add
2009).Beijing invested heavily in the oil and Gas sector up huge cost to the gas that is transported through
transportation facilities in Central Asian region as part the route, really making it more expensive than the
of the plans to link the region with China’s western gas purchase from other parts of international market.
provinces. China’s major energy partner in Central
Asia is Kazakhstan where the two countries share a 4.2 Price as a factor
1700 km long border. Significant share of Kazakhstan The global energy market is vulnerable to geopolitical
oil production is currently controlled by China. Beijing challenges and price fluctuations which in turn impact
also has constructed one of the longest pipeline linking the suppliers as well as consumers alike. It is noted
its western province to the Caspian Sea. The that when oil price surged in the last decade several
Kashganoil field in the Caspian Sea and several other import dependent countries faced serious challenges
oil production facilities in the Western City of Aktobe to their domestic economy (Arezki, et al., 2017).
have significant presence of china’s oil and gas However this also made a way for opening up of
companies. China also has developed access to the several non-conventional petroleum sectors like shale
energy markets of Turkmenistan and Uzbekistan. The industry and tar sands production as well as non-
Central Asia-China gas pipeline is one of the major conventional exploration techniques such as hydraulic
supply lines between China and Beijing. Other fracking or Fracking. Interestingly many of the oil
countries in the region also received Chinese and gas deposits that needed advanced technology
Investments in their respective energy sectors. While and high investment due to the geographical or
China invested in developing energy supply facilities technological limitations found opportunities due to
in Uzbekistan, Kyrgyzstan’s two large energy the high oil price scenario. This scenario also gave
refineries are supported by Chinese. Analysts often hope to countries that have been landlocked without
mention that the future of Central Asia energy trade any adequate transportation routes as well as to those
will be mainly oriented eastward. However this countries which are away from major consuming
depends heavily on the diversification of consumer countries. ‘It is observed by the World Bank that, as
networks Central Asian region can develop in the countries across Europe and Central Asia continue
east as a supplying bloc. to face challenging economic headwinds, the eastern
part of the region in particular is being impacted by
Apart from linking with China, one of the the collapse of oil revenues and the associated decline
most important supply routes that has been in in remittances (WorldBank, 2016) ‘. The GDP (Gross
discussion for past several years is the Turkmenistan Domestic Product) of many of the central Asian
- Afghanistan Pakistan - India (TAPI) pipeline. The countries that have been dependent on oil and gas
pipeline which connects Central Asia with South Asia revenue have observed a fall in the growth rate in
is expected to run about 1800 km linking Turkmenistan the past two years possibly due to low prices. More
Galkynish field which is estimated to have 16 trillion than the direct impact of low revenue or declining
cubic feet of gas, with India’s Punjab. The estimated GDP growth, another critical element that can
cost is over 10 million US dollars and the pipeline is adversely affect these energy rich countries is the
expected to carry 90 million standard cubic metres high exploration and development cost required for
10 World Focus October 2017
producing oil and gas. It is often understood that for for modernizing energy production facilities as well
a profitable exploration and production demand as supply infrastructure. It is believed that most of
activities, a high energy price in the international the existing energy infrastructure in these countries
market is a favourable prerequisite. The ‘fear of were built during the Soviet Era that urgently require
continuous fall or sustained low on oil price is already better technology integration. Similarly development
visible among many of the OPEC countries. Iraq of other energy resources within the Central Asian
which was one of the leading producers of oil is region is also critically important as an effort towards
currently facing critical challenge due to the low oil capacity building. This will be an important measure
price especially for the fact that the country is heavily for Central Asian energy industry to play a noticeable
dependent on oil revenue to rebuild it economy that role in the global market.
was heavily damaged by the geopolitical issues. On
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Endnotes
supply infrastructure would need huge investments.
1 The paper uses statistics from British Petroleum. To keep consistency across the
Third, the increasing consumption of Petroleum fuel sections, use of multiple data sources are minimised.
2 The research on the trends in the global energy landscape indicate that last decade
among Central Asian countries would demand
witnessed significant institutional changes that govern the world energy indus-
domestic energy produce to be directed to the domestic try. This section specifically carry the research conducted by the contributing
author Nandakumar Janardhanan, on the changing dynamics of global energy.
market.
3 Energy intensity is the energy used per unit of GDP
One of the critical challenges the Central
Asian energy players will witness is about the need
Changing Global Energy Dynamics and Role of Central Asia 11