By 2020 Russia will start to supply natural gas, making over one percent of annual global gas production

22 may 2014 | Rossiyskaya Gazeta

Negotiations for a new gas pipeline between Russia and China led to the signing of the memorandum of understanding on cooperation on natural gas issues in 2009. Later the parties signed the roadmap to the memorandum as well as the framework agreement on main terms for gas supply between Gazprom and CNPC. For several years, the parties were unable to agree on the price for natural gas.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

“For some reasons the negotiations were delayed”, Alexander Kurdin, Head of the Department for Strategic Studies in Energy of the Analytical Center, explains the current situation to Rossiyskaya Gazeta. “First of all, this is a large deal even by global standards. If the supply starts in 2020, the scheduled amounts of gas, which is around 38 billion cubic meters per year, will make 20-25% of Chinese import and 15-20% of Russian export of natural gas”, he added.

Secondly, the expert noted, there was no pressing need to force the transaction for any of the two parties, since they had and still have alternative markets of gas export and import. “For Russia, it is mainly the European market, which is at the moment much larger in scale and still quite perspective. For China, these are Turkmenistan which has surpassed Russia in this area and Southeast Asia which transfers liquefied natural gas by sea and pipeline”, explained Mr. Kurdin.

Thirdly, according to the expert, China often prefers to take a direct part in extraction projects and influence their management. In this case, noted Mr. Kurdin, China was not offered such an opportunity. This made the Celestial Empire search for additional guarantees for implementation, for example, the creation of expensive infrastructure for these supplies alone.

“Finally, the parties are adjusted to different markets, European and Asian, both having their own specific aspects. In this case, it is quite challenging to find common ground”, concluded Mr. Kurdin.