MOSCOW, May 20 (RIA Novosti), Nikita Alentyev – Russia is on the verge of signing a long-negotiated deal on gas supplies to China, which could ultimately reshape the geography of energy trade, William Powell, editor of International Gas Report told RIA Novosti Tuesday.
“You have to produce the gas first, and then ship it all the way across Russia from eastern Siberia to Vladivostok with part of it going on to China and the rest of it going to Vladivostok. With other fields, that could also supply the Power of Siberia pipeline, that could lead to more LNG production in Vladivostok, which would allow Gazprom to become an important gas exporter in the Far East,” Powell said commenting on the implication of a prospective deal between Moscow and Beijing, adding that in this case, Russian gas “could reach Japan, and Korea.”
In the context of the current political standoff between Moscow and Brussels over the Ukrainian crisis and EU plans to decrease its dependence on Russian gas supplies, experts earlier predicted Gazprom could offer China a significant discount to sign a long-awaited deal.
In a note to clients, Julia Nanay of IHS Energy seems to be echoing the opinion that it may well be Russia, as the one willing to compromise in the coveted bilateral trade deal.
“The ongoing crisis in Ukraine has heightened tensions between Gazprom and its European Union partners and customers, leading to more pressure on the company to reach agreement on a base price with China National Petroleum Corporation (CNPC). This could finally allow the conclusion of a deal which has been in negotiation for a decade,” Nanay stated, stressing the “political importance of achieving a deal quickly.”
While this is the case, Powell thinks a pricing compromise would be a shrewd foresight on Moscow’s side, allowing for more diversification and new markets.
“It needs to be done economically; developing Chayandinskoye gas field only for China could be expensive. Doing it for China and letting some of the gas go on to Vladivostok makes more sense as it would mean economies of scale. This could really open up eastern Siberian gas reserves for Russia, which is very important. And also it could critically allow Gazprom to compete with Turkmenistan, Uzbekistan and Tajikistan, who are already quite big suppliers. If Russia can secure this deal with China it may then negotiate supplies from another part of Russia and it would then be more diversified,” Powell concluded.
Russia’s Gazprom and CNPC are expected to sign a deal for deliveries of 38 billion cubic meters of Russian natural gas over the next 30 years to power the booming Chinese economy, which could translate into a firm foothold for Russia in the Asian market.
In an interview with the Bloomberg news agency Prime Minister Dmitry Medvedev said Russia and China are most likely to sign the long-awaited gas deal during the visit of President Vladimir Putin to Shanghai on May 20-21, reiterating the high profile of the prospective agreement.
