Global View

The Russian Federation will supply the People’s Republic of China with gas for 30 years starting from 2019

The project developed by Russia and China involves the construction of a pipeline in order to supply natural gas from the Siberian fields to China over a period of 30 years. According to Alexey Miller, Chairman of the Management Committee at Gazprom, the details of the agreed price of the business are considered a commercial secret. However, according to analysts, the price of the Russian gas delivered this way is around USD 350 per 1,000 cubic meters.

On May 21st, 2014, Gazprom and the China National Petroleum Corporation (CNPC) signed the Sales and Purchase Agreement to supply Russian gas to China through Power of Siberia gas pipeline. It is a 30-years agreement that provides for the delivery of 38 billion cubic meters per year.

On October 13th, 2014, in Moscow, the parties signed a Technical Agreement — a supplement to the Sales and Purchase Agreement. This document defines basic parameters of design, construction and operation of the Power of Siberia gas trunkline’s cross-border section. In addition, the document contains the main technical and technological specifications of the gas transfer from seller to the buyer.

In addition, on July 4th, 2017, Gazprom and CNPC signed a Supplementary Agreement to the Sales and Purchase Agreement for Russian gas supplies via the eastern route, thus setting the starting date for the deliveries. According to this document, gas supplies to China via the Power of Siberia gas trunkline will begin in December 2019. Alexey Miller, Chairman of the Management Committee at Gazprom, said that the remaining 2,156 kilometers of the Power of Siberia pipeline are soon to be built and expects China’s gas consumption to reach 300 billion cubic meters.

Moreover, in the future, Moscow and Beijing intend to build another pipeline – the Power of Siberia 2 or the Western Route to deliver another 30 billion cubic meters of Russian natural gas. In May 2015, the Chairman of the Gazprom Management Committee, Alexey Miller, and CNPC Vice President, Wang Dongjin, signed a Common Terms Agreement determining the main technical and commercial parameters of supply along the prospective Power of Siberia 2 pipeline. Gazprom and CNPC are currently discussing the terms of the sale-purchase agreement.

According to Gazprom, natural gas currently represents 6% of China’s energy mix, while coal, oil and non-fossil fuels constitute 62%, 19% and 13% respectively. The same source states that, according to the Plan of the State Council of the People’s Republic of China, the share of natural gas will reach 8.3-10% by 2020 and 12-15% by 2030. Furthermore, in accordance with the targets set for the natural gas industry in the 13th five-year plan, by the end of 2020, gas deliveries to the Chinese market (domestic production and imports) could rise up to 360 billion cubic meters, with gas-fired power generation capacities reaching 110 GW (5% of total electricity generation). According to this plan, the need for gas imports may double by the end of 2020, an increase to 150 billion cubic meters.

The Chayanda and Kovykta gas fields are located in the depths of eastern Siberia. The Power of Siberia pipeline, which will bring the gas to China through Vladivostok, will run for 4,000 km (2,500 miles) through swampy, mountainous and seismically active areas. According to Vladimir Putin, Russia will invest $55 billion developing the project, while China will invest at least $20 billion.

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