Facebook Twitter 新浪微博 google plus Instagram YouTube Tuesday 28 July 2015

Sino-Russian Gas Deal Delayed Indefinitely

By Liu Rong (People's Daily Online)    00:28, July 28, 2015

A deal for Russia to supply natural gas to China via the Power of Siberia-2, also known as the Altai gas pipeline, has been delayed indefinitely, According to Russian media.

Negotiations on the western route from Russia's Western Siberia to northwestern China have stalled as the two companies involved, Russia's Gazprom and state-owned China National Petroleum Corporation were reviewing their options amid slowing economic growth.

Under the original deal, Russia was to deliver 30 billion cubic meters (bcm) of gas a year to China through the pipeline. This was in addition to another 38 bcm to be delivered annually through an eastern route, the Power of Siberia pipeline. The construction of the pipeline has already started after the two sides signed a historic US$400 billion deal last May when Russian president Vladimir Putin paid a visit to Shanghai.

During the visit, Putin and his Chinese counterpart Xi Jinping also signed a memorandum of understanding on the Altai pipeline, with Putin noting that Moscow and Beijing had "agreed on many technical and commercial aspects of the project."

Since then, however, the growth in demand for gas in China appears to be slowing, while access to liquefied natural gas has become more available from countries such as Australia due to the fall in oil prices, according to Valery Nesterov, an analyst with Moscow-based investment banking firm Sberbank CIB.

Gas consumption in China rose by 12 percent to 13 percent in 2013, but has slowed considerably since, with the growth rate dropping to 8.5 percent last year and 2 percent in the first half of 2015, Nesterov said. He added that this means Gazprom will no longer be able to receive a high price for gas delivered through the western route.

Sergei Sanakoev, chair of the Russia-Chinese Center for Trade and Economical Cooperation, said Gazprom has offered CNPC a high price for the gas on the basis of the high cost of constructing the Power of Siberia-2 pipeline.

However, Sanakoev stated that "China is ready to build the pipeline at a cheaper cost and at public tender, so its companies could participate and for the construction price to be transparent."

"Gazprom refuses and China does not hurry," he said, adding that the deal may "also require political interference."

Gazprom CEO Aleksey Miller and Russian energy minister Aleksandr Novak previously said the contract for the western route could be finalized by May or June 2015, though only an agreement is in place.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Tian Li,任建民)

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