Gazprom, CNPC in gas import talks

PUBLISHED : Thursday, 22 September, 2005, 12:00am
UPDATED : Thursday, 22 September, 2005, 12:00am

Siberian pipeline could almost double China's supply as Beijing seeks to tilt energy mix towards gas

Gazprom, the world's largest natural gas producer, is negotiating with PetroChina parent China National Petroleum Corp (CNPC) to supply gas to the mainland from Siberia.

The Russian firm and CNPC were considering a pipeline route through northeast China and another through the Xinjiang region, Gazprom deputy chairman Alexander Medvedev said.

Gazprom, which produces 90 per cent of Russia's gas output and controls 60 per cent of its gas reserves, has rich resources in eastern and western Siberia.

'Commercial negotiations [with CNPC] to quantify the volume, define the schedule and the price formula will be conducted in the near future,' Mr Medvedev said.

To enhance energy security and cut pollution, China is aiming to double the weighting of gas as a component of its energy mix, from 3 per cent to 6 per cent by 2010, by raising domestic production and importing through pipelines and liquefied natural gas (LNG) tankers.

Mr Medvedev said the price formula will take into account global market conditions and China's substantial LNG import plan.

'It is too premature to indicate the price range [given] the unstable fuel price and oil product prices,' he added.

Mr Medvedev said that Gazprom should be able to export 20 to 30 billion cubic metres (bcm) of gas a year via either route to China, and added that eastern Siberia and Russia's far east had the potential to export 65 bcm to 75 bcm of gas annually to Asia.

China's entire domestic gas output amounted to 40 bcm last year.

CNPC signed a letter of intent with South Korea's Kogas and TNK-BP - a joint venture between BP and Russian investors - in 2003 to build a 4,000 km pipeline to sell gas from the TNK-BP-controlled Kovykta gas field in eastern Siberia to China and South Korea.

But progress has stalled as Moscow has not given the planned development its approval.

Gazprom, which is 51 per cent owned by the Russian government, is designated by Moscow as the co-ordinator of gas exports in eastern Siberia and the far east.

It is leveraging its position to drive a hard bargain in talks to buy into the giant Kovykta project.

'TNK-BP has no right to build a pipeline [to the mainland],' Mr Medvedev said.

Gazprom is aiming to raise its total gas export volume to 155 bcm next year from this year's forecast of 149.5 bcm, excluding output from the ex-Soviet republics.

Mr Medvedev said that Gazprom and CNPC had not begun discussing details of the construction of a pipeline between the two countries but added that they had agreed that each would be responsible for building sections in their respective territories.

Gazprom is also in discussions with China National Offshore Oil - parent of CNOOC - on supplying gas to feed China National Offshore's planned LNG import terminals along the mainland's east coast.

'Today there is a meeting [in Moscow] between our chairman and the president of [China National Offshore],' Mr Medvedev said.

'We will try to find our common interest in the LNG area.'