Central Asia Oil and Gas Transfer to China, Cooperative Game Theory Approach

Abstract

International institutions project a substantial increase in China's demand for oil and gas in the coming years. To secure its energy supply, China has pursued a strategy of diversifying import sources. Landlocked Central Asian nations and energy-rich Iran aim to capitalize on this demand by expanding their export capabilities. This study employs cooperative game theory to analyze the bargaining power of countries in potential oil and gas transmission scenarios from Central Asia and Iran to China through pipeline. By developing future scenarios and evaluating their economic feasibility, we assess the bargaining power of each country using the Shapley value. Our findings indicate that a country's geographic location and production capacity are key determinants of its bargaining power in energy geopolitics. Additionally, if Iran significantly increases its production and export capacity, and its pipeline network connects with Turkmenistan's, it could economically justify joining the coalition for natural gas exports through the Central Asia-China pipeline by supplying approximately 12 billion cubic meters of natural gas annually.