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.
The total value of the contract is $400 billion, Gazprom CEO Aleksey Miller said. However, the price of gas stipulated in the document remains a “commercial secret.”
Assuming the overall price of the contract includes only the cost of supplies of Russian gas, than the $400 billion price tag means China will pay about $350 per 1,000 cubic meters.
To date, this is the largest contract for Russia’s largest gas producer which has no such contract with any other company.
Russia will supply China 38 billion cubic meters of gas per year via the eastern ‘Power of Siberia’ pipeline, which crosses Siberia and reaches China’s populous northeast regions.
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 deal comes as a part of Russia’s larger-scale pivot to Asia and especially China as Western economies threaten sanctions over turmoil in Ukraine. Sanctions by the US and the EU have been mostly limited to visa bans and asset freezes on some of Russia’s top officials, while so far only threatening a so-called third round of real economic sanctions against Russian hydrocarbon businesses.
Just ahead of Putin’s visit to Shanghai, Russian Prime Minister Dmitry Medvedev 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.
Published by: www.rt.com
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