Russia’s Gazprom to supply gas to China from the end of 2019 in sign of tighter energy ties

New sales contract signed on the sidelines of Chinese President Xi Jinping’s visit to Moscow, while industry executives from both sides also held talks on expanding trade in crude oil

PUBLISHED : Wednesday, 05 July, 2017, 5:54pm
UPDATED : Wednesday, 05 July, 2017, 5:54pm

Russia’s largest natural gas producer, Gazprom, will start supplying the fuel to China through a pipeline across Siberia on December 20, 2019, Gazprom Chief Executive Alexei Miller told reporters after a meeting with China National Petroleum Company (CNPC).

CNPC chairman Wang Yilin and Miller met during this week’s visit to Moscow by President Xi Jinping and signed a supplementary purchase and sale contract, the state-owned Chinese company said on its website on Wednesday. It did not provide further details. The contract is part of a gas supply deal the two countries signed in 2014.

The deal is the latest sign that Russia is tightening its ties with China, a major gas buyer. It comes at a time of turmoil for rival major exporter Qatar, which is embroiled in a dispute with its Gulf neighbours who have imposed political and economic sanctions on it.

The new pipeline, dubbed the “Power of Siberia”, has a planned annual capacity of 38 billion cubic metres.

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CNPC said that it had agreed to speed up the construction of the pipeline and market development, as well as build natural gas processing plants and domestic underground gas storage facilities to make sure the project starts on time.

While the start date appears ambitious, analysts said the volume on the pipeline by the end of 2019 would likely be low ,and ramping up to full capacity would take some time. Russia needs to develop two new gas fields to fill it.

Russia may have offered China concessions on prices to secure its backing for the project, said Massimo Di Odoardo, vice-president of global gas and LNG research at Wood Mackenzie.

“Clearly this announcement is a big push to show the project is still alive,” he said at a press briefing.

“We wondered if this big push could also include some concessions.”

CNPC’s Wang also met Rosneft president Igor Sechin and discussed expanding crude oil trade, improving revenues from their joint refinery project in the northern Chinese city of Tianjin and expanding cooperation in exploration and development of oil reserves in Russia, CNPC said.

Gazprom’s Miller said that natural gas consumption in China was set to reach 300 billion cubic metres annually in the next few years.