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Russia and China sign 30-year gas deal

LNG Industry,

Russia today signed a gas supply deal with China estimated to be worth US$ 400 billion, ending negotiations that had spanned a decade. The deal was signed between the two major state-owned entities Gazprom and China National Petroleum Corp. (CNPC) in front of an applauding Russian president Vladimir Putin and his Chinese counterpart Xi Jinping at a summit in Shanghai.

The agreement will see Russia supply the world’s top energy consumer with 38 billion m3/year of natural gas for 30 years, starting in 2018. Mr. Putin said that the price formula was tied to the price of gas and gas fuel. He said that the Chinese drove a hard bargain. This is likely due to the fact that China has gas import deals with Turkmenistan, currently China’s largest supplier of natural gas.

Although no official figures have been released, it is thought that the price of gas could amount to US$ 350 per thousand m3, cheaper than the US$ 280 average in Western Europe. The Russian President said that the terms were satisfactory for both sides: “both sides were in the end pleased by the compromise reached on price and other terms”.

Gas will be transported via a new pipeline, which will receive a $US 55 billion investment from the Russians up to the Chinese border. CNPC will build the Chinese section.

Wider political significance

The deal for many symbolises an economic and geopolitical shift for Russia away from the West and towards the East at a time when European governments are seeking reduced reliance on Russian gas and imposing economic sanctions on The Kremlin following the crisis in Ukraine. Sino-Russian ties are at their closest in history according to representatives from both nations.


Edited from various sources by Ted Monroe

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