China, Russia Announce Historic Thirty-Year Gas Supply Deal

Business » ENERGY | May 21, 2014, Wednesday // 14:22
gas deal: China, Russia Announce Historic Thirty-Year Gas Supply Deal Russian President Vladimir Putin (L) and Chinese President Xi Jingping (R). Photo by EPA/BGNES

Russia's energy giant Gazprom and Chinese CNPC have signed a huge gas deliveries deal estimated at USD 400 B, following talks between state leaders.

The deal is expected to pump 1.14 trillion cubic meters of gas into China over the next thirty years and will provide some 38 bcm yearly, a fourth or fifth of what is delivered to Europe for the same period. 

Imports are however likely to start around 2018, when China's gas consumption is expected to have nearly doubled in comparison to its present levels.

Alexei Miller, Gazprom's chief, was quoted by RBC Daily as saying that part of the deliveries would be prepaid by the China National Petroleum Corporation. In his words, the advanced payment could be set aside to finalize the construction of The Power of Siberia, the gas pipeline which will lead the resource into China and which is estimated at USD 22 B.

Earlier he also claimed the 38 bcm supplies per year could be boosted to 60 bcm, even though he did not specify conditions for the increase.

On Wednesday Miller described the deal as Gazprom's "biggest deal", which has no match in trade relations with other countries.

Gazprom shares rose 2% on the Russian market after news of the agreement was spread, according to the BBC.

First Russian efforts to secure the deal started in 2004, but pricing was a long-standing issue which prevented it from becoming reality.

Wednesday's breakthrough means that Russia will outpace Turkmenistan as China's largest gas supplier.

Officials announced the agreement during Russian President Vladimir Putin's official visit to Beijing, where he held talks with his counterpart Xi Jingping, with the two touching a number of issues.

Apart from declaring interest to increase military cooperation, Putin and Xi have vowed to increase trade over the next decade, up from USD 89 B in 2013. They hope it could reach USD 200 B by 2024.

The historic deal, as well as the Sino-Russian talks, came amid Russia's push to expand its presence in the Asia-Pacific regions in order to protect itself from possible negative developments in relations with the EU and the US.

Moscow earlier announced it would seek to deepen ties with its Asian partners if the West imposes further sanctions over the situation in Ukraine.

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Tags: Alexei Miller, gas, Gazprom, CNPC, China National Petroleum Corporation, Xi Jingping, Vladimir Putin, China, Russia

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