International
Gazprom agrees with CNPC and PipeChina to build pipeline in Far East
By  LNG Journal, 7/1/23
Nov 8, 2023 - 12:01:57 PM

Russia’s state energy major Gazprom has reached an agreement with China National Petroleum Corp (CNPC) and PipeChina on the design and construction of a cross-border pipeline section in the Far East. A contract stipulates delivery of 10 bcm per year along the Far Eastern route, with Gazprom CEO Alexei Miller announcing first flows will start in early 2027.

Gazprom’s deliveries of 10 bcm via the Far Eastern route across the Ussuri River near the cities of Dalnerechensk, Russia and Hulin, China, come on top of flows via the Power of Siberia pipeline which are expected to reach the contractual level of 38 bcm/y in 2025.

China is considering increasing gas import beyond the Power of Siberia’s design capacity, Miller noted, indicating “such an agreement could be reached soon.”  Analysts doubt, however, such a deal will be imminent considering negotiations about the initial deliveries of 38 bcm/y under a 30-year contract, worth some $400 billion were hard-fought on price.

Pivoting East, Russia is also working with China and Mongolia to advance an interconnector which would deliver previously Europe-bound gas from fields in western Siberia to China starting from 2030. The proposed Power-of-Siberia 2 pipeline would carry natural gas from Russia’s huge reserves in the Yamal peninsula in western Siberia over 2,600 km though eastern Mongolia to China’s northeast Heilongjiang province. If all goes to plan, the pipeline would supply 50 bcm/y of Russian gas to China – just 5 bcm less than the now dysfunctional Nord Stream 1 pipeline linking Russia with Germany. 

In February 2022, China already agreed to purchase gas from Sakhalin in the Russian Far East, which will be transported via a new pipeline across the Japan Sea to Heilongjiang province. Agreed volumes will reach up to 10 bcm/y starting from around 2026.

Keen to not put all eggs in one basket, China is also trying to get additional gas from Central Asia. A new pipeline could source some 25 bcm/y of gas over a period of 30 years from Turkmenistan via Tajikistan and Kyrgyzstan. Moreover, nine new LNG term contracts began deliveries in 2023, more than offsetting the two short-term contracts that expired at the end of last year. With about 13 bcm of new LNG contracts starting shipments, contracted volume is on course to reach nearly 110 bcm this year – substantially higher than projected demand. Chinese buyers could hence ramp up LNG imports back to the 2021-peak of 108 bcm without having to buy comparatively expensive spot cargoes.  

Source: Ocnus.net 2022