After reducing nearly half of the natural gas supply to China at the end of January 2018, the gas transmission to China by the Central Asian natural gas pipeline was once again greatly reduced. According to reports, certain people familiar with the industry revealed that Turkmenistan's Natural Gas Konzern suddenly lowered the natural gas supply on January 7 without prior notice to China National Petroleum Corporation (CNPC), resulting in the import of CNPC from the Konzern reduced by approximately 35 million cubic meters per day. Since entering the heating season this winter, Turkmenistan's Natural Gas Konzern's daily gas supply to China is about 60 million cubic meters. On January 6, its gas transmission to China was still 63 million cubic meters. This means that CNPC's natural gas imports from Turkmenistan have been reduced by 42% without prior warning.

On the reduction of natural gas supply, the official reason given by Central Asia is that due to the aging of the local power supply infrastructure, the accidental power outage caused the power consumption of the natural gas compressor unit had to be stopped. However, this is exactly the same as what had happened at the beginning of 2018, which makes it hard to believe that this is really an "accident." On January 31, 2018, CNPC issued a document saying that on January 30, the gas supply from Central Asia was reduced from 120 million cubic meters to 0.7 billion cubic meters, a decrease of nearly half. According to the news at the time, the gas supply countries in Central Asia did not deliver the natural gas that should be delivered to China according to the contract. The reasons included that the gas transmission equipment was broken and there was no money for the repair.

According to the situation as understood by Anbound, the China-Central Asia natural gas pipeline from the border of Turkmenistan and Uzbekistan on the right bank of the Amu Darya is the longest natural gas pipeline in the world, with a total length of about 10,000 km, passing through the center of Uzbekistan and southern Kazakhstan, after entering Khorgas from China, it becomes West-East Gas Pipeline Second-Line. The pipeline in Turkmenistan has a length of 188 km, 530 km in Uzbekistan, 1,300 km in Kazakhstan, and the remaining 8,000 km is in China. Central Asia's natural gas is mainly from the Amu Darya Gas Company and the Natural Gas Konzern in Turkmenistan, as well as Uzbekneftegaz of Uzbekistan.

Turkmenistan is the largest exporter of pipeline natural gas to China. According to statistics from the General Administration of Customs of China, in 2017, natural gas imports from Turkmenistan were 19.322 million tons, accounting for 84.6% of China's total pipeline natural gas imports during the same period. The Central Asian pipeline gas source has been suddenly reduced, which will cause an unexpected market supply gap in China, and liquefied natural gas (LNG) prices may rise. The industry expects that CNPC will launch an emergency plan, which is expected to have a greater impact on domestic LNG prices. It is understood that CNPC and withstand the current pipeline pressure for a few days, but the domestic reserve capacity is limited. If the time is longer, it may not be able to withstand, and there would be a necessity to comprehensively limit the gas. What makes China passive is that when it comes back to the gas supply, it can only wait for the notice from Central Asia.

The sudden reduction of Turkmenistan's gas supply has immediately triggered an impact in the Chinese market. According to Baichuan Information, on January 7, the natural gas prices in China had soared, and LNG prices in some areas have exceeded RMB 6,000 per ton. Many plants continue to raise LNG prices. There are 27 LNG liquefaction plants in China, and prices in Hebei, Sichuan, Hebei, Inner Mongolia, Shaanxi, Henan, Shanxi and other places have reached RMB 50-400 per ton. Among them, the northwest LNG liquefaction plant accounted for more than 66% of the price increase, among the total of 18 plants. On December 12, 2018, due to the continuous rise of LNG, CNPC has launched a round of emergency plans. On December 11, 82 LNG liquid plants and LNG terminals in the Chinese LNG market increased in price, of which 42 in the northwest liquid plants consisted of 51.2% of the price increase.

Turkmenistan's sudden reduction in gas supply is the second time in a year where China has suffered from energy supply risks from Central Asia. While China is making great efforts to adjust its energy consumption structure and replace natural gas with coal-fired heating and power generation, the reduction of supply in Central Asian countries is something drastic. Countries that used to be regarded as China's energy security guarantees have become its risk factors, and CNPC is now feeling pressured. On January 7th, CNPC's official website said that the current situation of natural gas supply is grim, "there is a huge pressure of regulation and supply". On December 29, CNPC's full-caliber natural gas sales reached 703 million cubic meters, breaking through 700 million cubic meters for the first time. Since entering the heating season on November 15, 2018, CNPC has supplied about 130 million cubic meters of natural gas per day. At present, the gas supply has exceeded 830 million cubic meters per day, a record high.

Anbound's scholars once again called for China to urgently reassess the risks of energy supply in Central Asia. As early as the end of January 2018, when the reduction of natural gas supply in Central Asia led to the crisis in China, Anbound immediately issued an early warning, suggesting China to re-evaluate the safety and related risks of energy supply in Central Asia. That time, it was the same Turkmenistan's Natural Gas Konzern, which had shut down three times in January last year. We once again remind relevant Chinese departments to pay attention to risks. Central Asia is becoming a "breakpoint" in China's efforts to build an international energy supply security network; this is what China should be alert of. In the past 20 years, China has invested huge resources in finance, diplomacy, investment, market, and fiscal policy, and has worked hard to establish five major international energy supply channels to support the demand for oil and gas resources with the largest consumption scale in the world. In recent years, China has continuously adjusted its energy consumption structure and turned to green development. The demand for natural gas continues to grow, leading to an increase in dependence on foreign natural gas supply.

At the height of China's rapid growth in demand, the Central Asian countries suddenly "violating the contract" to reduce gas supply to China, which has harmed the Chinese market. If this important channel of the international gas supply is not safe, the safety of the Central Asian energy supply network needs to be re-evaluated. It is uncertain whether the institutions such as CNPC and China's National Energy Administration (NEA) have seriously assessed the risks in Central Asia after the gas supply risk incident a year ago; it seems that China is still rather passive in this regard. If the Central Asian countries are doing this in the cold winter weather every year, China will become too passive in the prevention of energy supply risks.

Final analysis conclusion:

Turkmenistan has suddenly reduced its supply of gas to China; this is once again a warning sign that China's energy supply network in Central Asia is at risk. China needs to re-evaluate the security of the Central Asia energy supply network and adjust its countermeasures according to risk assessment. China may need to consider alternatives to the energy supply channels in Central Asia.