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Russia and China edge closer on Siberian gas mega-deal: only the price to be agreed

By The Siberian Times reporter
06 September 2013

Presidents Vladimir Putin and Xi Jinping oversee agreement of an historic pact ahead of G20 meeting in St Petersburg.

The deal, first announced in June, also saw Novatek agree to deliver at least 3 million tons of natural gas a year to China. Picture: Gazprom

The final deal should be signed by the end of the year, said Gazprom chief executive Alexei Miller. Price has been the sticking point for years in an agreement that will see Russia change its orientation to the east from its traditional markets in Europe. 

'Everything has been agreed, except the price,' a source close to Gazprom told AFP. The deal was inked between Russian gas giant Gazprom and the China National Petroleum Corporation (CNPC) for the long-term deal to supply at least 38 billion cubic metres of Russian gas a year to China.

The project involves a new Russian pipeline to China by 2018.

'Parameters were agreed, so it's only left to agree on the price. We hope this will happen soon,' said Putin's chief spokesman Dmitry Peskov.

'The final achievement of an agreement on the specifics of the Gazprom deal comes just a day after China's President Xi opened the world's second-largest gas plant in neighbouring Turkmenistan that will send at least 25 billion cubic meters a year of the fuel to Beijing,' reported RIA Novosti. 

'CNPC also signed a deal to acquire a 20 percent stake in the Yamal liquid natural gas (LNG) plant from Novatek, Russia~s biggest independent gas producer.

'The deal, first announced in June, also saw Novatek agree to deliver at least 3 million tons of natural gas a year to China. The Russian company said in a statement it expects that deal to be finalized by December, providing it is approved by Russian state regulators.'

Gazprom Chayandinskoye gaz mine

Russia and China edge closer on Siberian gas mega-deal: only the price to be agreed. Picture: Gazprom

Gazprom 'has been in talks with Beijing for years as it seeks to diversify its customers away from Europe, but China, the world's top energy user, has proved to be a tough negotiator, demanding a steep discount to prices paid by Western utilities,' reported Reuters.

'The average gas price for Europe in long-term contracts Gazprom negotiates this year is expected to be around $370-$380 per 1,000 cubic metres, down from $402 last year. Sources has said CNPC has dug in at $250 as it aims to preserve a cost advantage that makes Chinese producers more competitive in the world.'

'The key question remains - what's the discount to the European gas price? I think it could be close to 30 percent, given that China has access to other supplies,' said Andrey Polischuk, a Raiffeisen Bank analyst. The Force of Siberia pipeline, which will pump gas from the Chayanda field in the northern republic of Sakha (Yakutia) to the Far East city of Vladivostok, includes a branch to China.

Comments (1)

The problem is that it leads Europe to ask for the same price because also European producers wants that cost advantage. Germany pays better and more than China, and they want the same cost advantage so they will look also for alternative supplies until gas prices in Europe and China are equivalent.
Enrique, Spain
08/09/2013 05:22
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