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UPDATE 2-Gazprom to start gas supplies to China via Siberia in Dec. 2019
July 5, 2017 / 8:50 AM / 3 months ago

UPDATE 2-Gazprom to start gas supplies to China via Siberia in Dec. 2019

(Updating to add analyst comment in paragraphs 6-9)

By Dominique Patton and Denis Dyomkin

BEIJING/MOSCOW, July 5 (Reuters) - Russia’s largest natural gas producer Gazprom will start supplying fuel to China through Siberia on Dec. 20, 2019, Gazprom Chief Executive Alexei Miller told reporters, after a meeting with China National Petroleum Company (CNPC).

CNPC chairman Wang Yulin and Gazprom’s Miller met during this week’s visit to Moscow by President Xi Jinping and signed a China-Russia supplementary purchase and sale contract, the state-owned Chinese company said on its website on Wednesday.

It did not provide further details.

The deal is the latest sign that Russia is tightening its ties with China, a major gas buyer. It comes at a time of turmoil for rival major exporter Qatar amid a dispute with its Gulf neighbours who have imposed political and economic sanctions on Doha.

The new pipeline, dubbed the “Power of Siberia”, has a planned annual capacity of 38 billion cubic meters.

CNPC added that it agreed to speed up the construction of pipeline and market development, as well as natural gas processing plants and domestic underground gas storage facilities to make sure the project starts on time.

While the start date appears ambitious, analysts said the volume on the pipeline by the end of 2019 would likely be low and ramping up to full capacity would take some time. Russia needs to develop two new gas fields in order to fill it.

Russia may have offered China concessions on prices to secure its backing for the project, said Massimo Di Odoardo, vice president of global gas and LNG research at Wood Mackenzie.

“Clearly this announcement is a big push to show the project is still alive,” he said at a press briefing.

“We wondered if this big push could also include some concessions.”

Wang also met with Rosneft president Igor Sechin and discussed expanding crude oil trade, improving revenues from the Tianjin refinery project and expanding cooperation in exploration and development in Russia, CNPC said.

Miller said that natural gas consumption in China was set to reach 300 billion cubic metres annually in the next few years.

Reporting by Denis Dyomkin in MOSCOW and Dominique Patton in BEIJING; additional reporting by Josephine Mason and Chen Aizhu in BEIJING; Editing by Richard Pullin

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