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Putin signs decree to confirm Power of Siberia project

By Anna Liesowska
04 May 2015

After months of speculation, parliament and President rubber-stamp deal that will see gas sent to China.

It comes exactly a year after Mr Putin signed a deal with Chinese leader Xi Jinping to supply 38 billion cubic metres of gas every year from 2018. Picture: ITAR-TASS

The iconic Power of Siberia project will produce its first gas in three years’ time after Vladimir Putin finally signed a decree approving a supply to China.

Earlier this year there were concerns that the $55billion line, which will send gas along a 4,000km route from the Sakha Republic, could be in jeopardy. But, following approval from the lower and upper houses of the Russian parliament last week, the President has now rubber-stamped the Eastern Route.

It comes exactly a year after Mr Putin signed a deal with Chinese leader Xi Jinping to supply 38 billion cubic metres of gas every year from 2018. When it was first announced, the project was seen as a 'diplomatic coup' for Moscow.

Driving that deal was the need to tap into Yamal gas, including the giant Bovanenkovo Yamal field which was opened in 2012 and now pumps around 40 billion cubic metres a year but can produce up to 140 bcm.

The new decree signed on May 2 contains a number of stipulations for the project regarding the movement of equipment, resources and personnel crossing the border from China.

It states that all parties should encourage the use of national currencies of Russia and China, and pledge to create special tax conditions that will assist in the expansion of cooperation between Gazprom and the Chinese National Petroleum Corporation (CNPC).

In particular items that are imported into China or Russia for the construction of the gas pipeline will be exempted from VAT payment and customs duties. The document also notes that the cross-border section will be near Blagoveshchensk in Russia and Heihe in China.

The resource base for the gas supplies will be the new Chayandinskoye and Kovykta gas fields located in Yakutia and the Irkutsk region. A wave of new construction will be needed, not only for the pipeline itself but for the movement of equipment and workers across the Amur River.

It has already been reported that the main contractor Stronytransgaz has entered into contract talks for the supply of building materials.

The Yakut cement plant Yakuttsement will also soon start production of reinforced concrete for the construction of the pipeline itself in a deal worth 3.2billion roubles ($5.5million). Within two years the factory will have to produce 300 of such slabs every day between May and October.

The build-up of Gazprom’s production activities has had a positive effect on the regional economy. In the recent five years the company has invested 10.1 billion roubles (£173million) into the projects in Yakutia, and in 2015 the volume of investments will reach some 42 billion roubles ($722million).

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