Kazakh crude flowing through a landmark pipeline opened four months ago is set to reach China in a week, helping the world's No.2 oil consumer cut back on spot imports, a Chinese industry official said April 21.

The pipeline will ultimately supply 4.5 million tons this year, equivalent to about 4 percent of China's total oil imports last year, part of the country's move to boost supply security with more long-term contracts from key suppliers.

"It will start feeding the refineries in May," said an official from State-run China National Petroleum Corp (CNPC) from Beijing, referring to plants in Xinjiang and Lanzhou run by its listed subsidiary PetroChina.

PetroChina, Asia's biggest oil and gas producer, operates refineries mostly in the country's north and supplies 40 percent of the Chinese fuel market.

The supply rate matches industry estimates that the US$800 million, 965-kilometer pipeline would be running at half its designed capacity of 10 million tons a year (200,000 barrels per day) in 2006 and operate at full tilt by end-2007.

On a daily basis, the pipeline will carry 137,000 barrels of oil to Chinese refineries from May, or about 2.3 percent of China's current total refinery production.

The Atasu-Alashanko pipeline is China's first international crude line. China has been talking with Moscow for over a decade to build an oil pipeline from East Siberia in Russia, the world's second-largest exporter after Saudi Arabia.

Until now China has imported Kazakh crude oil by train, taking 26,000 barrels per day (bpd) in 2005, customs data show.

The CNPC official said crude supply via rail will continue even after the flow via pipeline is under way, but he declined to give further details.

Most of the new oil will be pumped from CNPC-operated oilfields in its Central Asian neighbor, including the Aktobe field in the northwest and the Kumkol fields that CNPC recently acquired when it bought Canada's PetroKazakhstan.

The Kazakh-China pipeline ends at the Chinese border town of Alashanko in the Xinjiang Uygur Autonomous Region, from where CNPC has laid a 246-kilometer pipeline to carry oil to its Dushanzi refinery, now being expanded to take more Kazakh crude.

PetroChina's refineries in Xinjiang as well as Lanzhou, the fuel supply hub in the vast, remote western China region, are expected to raise crude throughput this year to process the increased supply of Kazakh oil.

The Dushanzi plant, now undergoing a US$3.2 billion-expansion to boost its refining capacity and to build a world-class 1 million ton-per-year petrochemical complex, will be the main taker of Kazakh crude, but not until mid-2007, when its refining capacity is doubled to 200,000 bpd.

"For this year there will not be a significant increase in our refinery output, so some of the new piped crude will be sent to other plants," said an official from Dushanzi. The 100,000 bpd plant ran at 88 percent capacity last year.

The 200,000-bpd Lanzhou refinery, another PetroChina unit more than 2,000 kilometers east of Dushanzi, is bracing for more Kazakh oil flows for a full run this year, 11 percent above last year.

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