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Russia signs gas supply deal with China China guarantees to purchase 1.3 trillion cubic feet per year of Russian gas, for delivery through Siberian pipeline starting in 2018 Alan Bailey Petroleum News
Following a recent agreement over the supply of Russian natural gas to China, Russian gas company Gazprom has finalized a deal with the Chinese National Petroleum Corp. for the delivery of 1.3 trillion cubic feet per year of Russian gas to China starting in 2018, the U.S. Energy Information Administration has reported.
A future phase of the delivery contract could increase the volume to 2.1 tcf per year, EIS says. Apparently the gas price is indexed to international crude oil prices, with the Chinese company agreeing to pay for the contracted volumes of gas, regardless of whether the company chooses to take delivery of all of the gas.
EIA says that the gas will come mainly from gas fields in eastern Siberia and will be exported through a planned Power of Siberia gas pipeline. The Power of Siberia line will deliver gas into China and to a liquefied natural gas plant on Russia’s east coast, EIA says.
Gazprom is majority owned by the Russian government and, according to EIA, has a monopoly of Russian gas exports by pipeline. EIA says that other companies operating in Russia can compete over the export of liquefied natural gas, although, according to the Gazprom website, Gazprom is currently the only producer and exporter of liquefied natural gas in Russia.
Demand exceeding supply The new Russian gas supplies will mostly go to China’s northern and eastern provinces, where gas demand is growing beyond the delivery capabilities of existing gas supply arrangements, EIA says. China has also agreed to purchase 1.3 tcf per year of gas from Turkmenistan by 2016, with that volume increasing to 2.2 tcf by 2020, the agency says.
EIA says that the Chinese government also wants to see an expansion of Chinese domestic gas production, with that production projected to increase from 4 tcf in 2012 to some 10 tcf by 2040. A key part of the government’s strategy is the development of Chinese shale gas, with an EIA assessment indicating that the country may have 1,115 tcf of technically recoverable gas in shale gas deposits.
And imports of liquefied natural gas will help meet rising demand in China’s eastern and southern coast region, EIA says.
EIA projects Chinese gas demand to be about 17.5 tcf by 2040. Of that volume, 3.6 tcf would come from the new Russian and Turkmenistan supply contracts. Internal Chinese gas production might account for 10.1 tcf per year, with the remaining 3.8 tcf coming from other supply contracts, including contracts for the import of liquefied natural gas.
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