Friday, May 23, 2014

Russia and China seal historic $400bn gas deal

After 10 years of negotiations, Russia's Gazprom and China's CNPC have finally signed a historic gas deal which will provide the world's fastest growing economy with the natural gas it needs to keep pace for the next 30 years.

A memorandum of understanding was signed in the presence of Russian President Vladimir Putin and President of China Xi Jinping on the second day of Putin’s two-day state visit to Shanghai.

The price China will pay for Russian gas remains a "commercial secret" according to Gazprom CEO Aleksey Miller. Gas will be delivered to China's via the eastern 'Power of Siberia' pipeline.

RT producers were informed of the landmark energy deal prior to its signing after a conversation with Miller.

Under the long-term deal, Gazprom will begin providing China's growing economy with 38 billion cubic meters of natural gas per year for the next 30 years, beginning in 2018. The details of the deal were discussed for more than 10 years, with Moscow and Beijing negotiating over gas prices and the pipeline route, as well as possible Chinese stakes in Russian projects.

Just ahead of Putin's visit to Shanghai, Russian Prime Minister DmitryMedvedev gave reassurance that the agreed price would be fair.

“One side always wants to sell for a higher price, while the other wants to buy for a lower price,” Medvedev said. “I believe that in the long run, the price will be fair and totally comparable to the price of European supplies.”

A major breakthrough in negotiations came on Sunday as Gazprom chief Aleksey Miller sat down with his CNPC counterpart, Zhou Jiping, in Beijing to discuss final details, including price formulas.

Although Europe is still Russia's largest energy market – buying more than 160 billion cubic meters of Russian natural gas in 2013 – Moscow will use every opportunity to diversify gas deliveries and boost its presence in Asian markets.

“I wouldn’t look for politics behind this, but I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in the future,”Medvedev said.

In October 2009, Gazprom and CNPC inked a framework agreement for the Altai project which envisions building a pipeline to supply natural gas from fields in Siberia via the western part of the Russia-China border.

In March 2013, Gazprom and CNPC signed a memorandum of understanding on Russian gas supplies to China along the so-called eastern 'Power of Siberia' route. When both pipelines are activated, Russia can supply Asia with 68 billion cubic meters of gas annually.

Last year, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020.

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