UPI Energy Watch

United Press International
June 30 2004

UPI Energy Watch
By John C.K. Daly
International Correspondent

WASHINGTON, June 30 (UPI) — According to Chinese Standing Committee
of the Communist Party of China member Li Changchun, trade turnover
between Kazakhstan and China will soon reach $5 billion.
Chinese-Kazakh trade totaled $3.3 billion in 2003. Li met with Kazakh
President Nursultan Nazarbayev in Almaty to discuss bilateral
relations, stressing, “The two states are true friends and good
partners. Friendship between our peoples has deep, old-time roots. It
was the Great Silk Road that once tightly linked our countries by
bonds of trade.” On Nazarbayev’s recent visit to China, nine
agreements were signed. One agreement stipulated that China and
Kazakhstan will construct a Kazakhstan-Western China oil pipeline
with an annual capacity of 20 million tons. China is one of
Kazakhstan’s major trade and economic partners; Kazakhstan is China’s
second-largest trading partner after Russia.


Iran’s Secretary of Supreme National Security Council Hassan Rowhani
stated that Iran is seeking to improve its relations with Armenia.
Iran regards development of relations with Armenia as being in line
with helping regional cooperation to restore peace and security to
the entire region. “Yerevan has special status in Iranian history and
Iran is willing to boost the historical relations between the two
countries,” Rowhani said. Iran and Armenia signed an accord to
construct a new gas pipeline scheduled for completion by 2006.
Rowhani noted, “The Aras River is valuable pivot for strengthening of
economic cooperation through construction of a dam and a power
plant.” The construction of the Gajeran Tunnel will link Armenia to
the north-south corridor and Iran to the Black Sea. Rowhani requested
the start of province-to-province cooperation from both sides to
boost trade and called on the Armenian government to support Iranian
nationals living in the republic. The chief of the Armenian
Presidential Office, Artash Tumanyan, added, “Tehran-Yerevan
relations are essential for regional security and that Iran has
special status in the foreign policy of Armenia.”


According to Russia’s Gazprom subsidiary Gazeksport’s general
director, Aleksandr Medvedev, the market price of liquefied natural
gas will be used to calculate the price of Russian gas supplies to
China. Medvedev added that China and Russia will construct a
1,207-mile gas pipeline to transport natural gas from Irkutsk to
markets in northeast China and South Korea which Gazprom will
operate. Gazexport will shortly begin negotiations with Korea Gas
Corp., known as Kogas, and China National Petroleum Corp. over the
supply of natural gas through the new pipeline. Russia Petroleum and
Russian-British TNK-BP are developing the Kovykta project for
constructing the Kovykta gas-condensate field in the Irkutsk region.
Under the agreements, China would purchase 33 billion cubic yards of
gas annually and South Korea 44 billion cubic yards annually from the
Kovykta field. To transport the gas to Chinese and South Korean
markets, China needs to build a 887-mile pipeline from the Russian
border to the port city of Dalian to connect with a 333-mile subsea
pipeline to Pyongtaek in South Korea.


According to the British Secretary of State for Trade and Industry
Patricia Hewitt, British companies plan to participate in building a
North European gas pipeline. Hewitt said, “I am aware of Gazprom’s
plans to establish a North European gas pipeline, which is to provide
a more direct route for the pumping of Russian gas to the EU,
including Great Britain.” Hewitt emphasized, “as far as Britain is
concerned, it is definitely up to the commercial sector to decide
whether the project is an economic proposition. But I am certain that
British companies specializing in the funding, design and management
of projects, as well as construction and delivery of equipment and
services, would be very interested in taking part in this project.”
Asked whether Great Britain was interested in purchasing more Russian
gas and Hewitt replied, “I would be glad if Britain imported more
Russian oil and gas,” said Hewitt. The European Commission is
preparing studies of restricting or banning oil shipments through the
Baltic Sea, particularly ones carried by Russian single-hulled


GE Energy has received a $35 million contract to upgrade control
systems and instrumentation on nearly 100 pipeline-booster compressor
trains in Algeria. The project involves gas turbines and compressors
at compression stations along Sonatrach’s natural-gas pipelines. The
project will upgrade Sonatrach’s pipeline network for transporting
natural gas to its liquefied natural gas facilities on the
Mediterranean coast, and is slated to begin in the third quarter of
2004. The upgrades will take approximately 30 months.

Sonatrach is an Algerian-owned petroleum company and the leading
business on the African continent. Sonatrach is the 11th-largest
petroleum company in the world and second-largest exporter of LNG.


In June, the Baku-Tbilisi-Ceyhan pipeline opened over 108 miles of
the Right of Way, welded 105 miles of pipe joints, and backfilled 86
miles of the pipeline. Only 15 percent of the 1,098-mile Right of Way
remains to be opened. Azeri President Ilham Aliyev visited pump
station PSA2 near Yevlakh, which is now over 75 percent complete. BTC
has made good progress at river crossings in Azerbaijan and finishing
auger boring under the Kura River. In Turkey, a third welding crew
was mobilized for work in Lot B. At Lot A, the rate of trenching and
backfill work was intensified after new excavation equipment was

Closing oil prices, June 30, 3 p.m. London

Brent crude oil: $32.90

West Texas intermediate crude oil: $38.89