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WorldAsiaWhy China and Russia are in no rush to launch the biggest...

Why China and Russia are in no rush to launch the biggest gas project – Reuters


The signature was expected earlier. In 2021, when gas prices in Europe were just starting to break records, it looked like China itself would be rushing to strike long-term contracts with Russia, but that didn’t happen. Beijing first tried to push the most favorable terms for itself on gas supplies from Russia. And he made his way. According to various estimates, China now receives Russian gas at a price of $100-200 per thousand cubic meters through Power of Siberia. For comparison, in 2021 Russia sold gas pipeline to the EU at an average price of $274 per thousand cubic meters, while in 2022 the average price was significantly higher than $1,000 per thousand cubic meters. Cubic meters.

According to the head of the National Energy Security Fund, Konstantin Simonov, it now seems clear from China that Russia, having lost 80 billion cubic meters of gas exports to Europe, desperately needs new markets. . China shows it has alternative supply options – liquefied natural gas (LNG), pipelines from Turkmenistan and Myanmar. In addition, in 2022, China also saved Europe by reselling the LNG from its portfolio there. But all this does not negate the fact that China still needs Russian gas and drags out the negotiation process, trying to get the most favorable trade terms, the expert believes.

Beijing’s reasons are understandable and transparent, and therefore Russia is in no hurry to agree to Chinese terms that are not beneficial to us. Yes, gas exports have fallen, but Russia’s budget is less dependent on gas exports, much more dependent on oil production and supplies from abroad. In fact, Gazprom is currently the party that is suffering the most, but, given the company’s latest financial results, we are still talking only about the loss of excess profits.

According to Simonov, if China is trading, we need to strengthen our negotiating position. It is known to be difficult to do this at the expense of the resource base. There is no doubt that we will be able to deliver these 50 billion cubic meters per year (the planned capacity of Power of Siberia-2) to China. It is therefore necessary to play more actively in the “field” of alternative suppliers. For example, with Uzbekistan, which can be used as a proxy provider. It no longer has enough gas for domestic consumption and export.
Russia could also reduce the presence of Turkmen gas in the Chinese market if it agrees to the construction of the Trans-Caspian pipeline, Simonov said. As a result, Turkmen gas will go to the European market, which is now closed to us, and we can claim increased deliveries to China. It will also allow Turkmen gas to reach the Turkish hub (gas trading point), making it more liquid and attractive to buyers. Various combinations are possible, it’s a great game to participate in, explains the expert.

It should also be borne in mind that the construction of a gas pipeline is not a quick affair. It is hardly worth making a decision on this, guided by the momentary political situation, which is changing very quickly. Even the surviving capacities (after the erosion of the Nord Streams) of exporting Russian gas to the West make it possible to supply Europe with more gas than currently to China, and taking into account the transit through Ukraine, even more than after the construction and launch of Power of Siberia-2″.

On the other hand, Power of Siberia-2 is a huge project – the length of the pipe is 6,700 km, and 2,300 km in our territory, in regions where the pace of gasification depends on its implementation, estimates Simonov. For example, the Krasnoyarsk Territory, where about 8 billion cubic meters of gas per year should go. From his point of view, the construction will take about 5-7 years, so Gazprom may already be planning to start work without signing contracts with China, which will eventually be signed anyway.

Copyright © 2023 The Eastern Herald.

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