Moscow (Brussels Morning Newspaper) – Russia’s Gazprom has consented to a modest increase in gas supplies to China through an existing pipeline and has also signed a memorandum to develop the extensive Power of Siberia 2 pipeline, though at prices lower than those offered to European customers, according to state news agencies.
The development comes amid Russia’s push to bolster its energy relationship with China, its largest trading partner, following the loss of market share in Europe due to sanctions following the conflict in Ukraine in 2022.
Last month, Reuters reported that China was looking to purchase additional Russian gas through an existing pipeline after negotiations stalled for a new pipeline.
What are the details of the Power of Siberia 2 project?
Alexei Miller, CEO of Gazprom, the Russian state-owned natural gas company, reported on Tuesday that a deal had been reached to increase supplies through the existing Power of Siberia pipeline from 38 bcm to 44 bcm a year. The Power of Siberia pipeline connects eastern Siberia to China.
Russia and China have also agreed on a deal to build a new Power of Siberia 2 pipeline, which will export 50 bcm a year to China through Mongolia. Miller reported that the gas will be sourced from the Yamal located Bovanenkovo and Khanasavey fields.
“Today, a legally binding memorandum was signed on the construction of the Power of Siberia 2 gas pipeline and the Soyuz Vostok transit gas pipeline through Mongolia,”
Miller said, Russian news agencies reported.
Why is China paying lower prices than European buyers?
Miller stated that China’s gas supply prices are cheaper than what Russia charges European buyers, mainly because of the extensive distances and challenging terrain for pipeline construction. He noted that Power of Siberia 2 will be the biggest and most capital-intensive gas project in the world.
Miller said this after President Vladimir Putin met with Chinese President Xi Jinping and Mongolian President Ukhnaagiin Khurelsukh in Beijing. He indicated that gas pricing, for gas supplied through Power of Siberia 2, would be negotiated separately, according to Russian news agencies.
As reported by China’s state news agency Xinhua on Tuesday, the two leaders discussed a variety of topics in detail. They concluded the meeting by signing over 20 bilateral cooperation agreements in multiple areas, including energy. Gazprom shares were up 0.5% in trading in Moscow.
What is the significance of the 2014 Russia-China gas deal?
The existing agreement between Russia and China on gas supplies involves Russia’s Gazprom and China’s China National Petroleum Corporation (CNPC). The previous gas supply agreement between Russia and China was signed on May 21, 2014. This was a 30-year deal valued at approximately $400 billion, in which Russia agreed to supply China with 38 billion cubic meters of natural gas annually starting in 2018 through the Power of Siberia pipeline.
