China-Russia natural gas infrastructure

China recently negotiated a US$ 400 billion, 30 year gas deal with Russia to bring Russian natural gas to China.

Constructing the necessary infrastructure

In its recent analysis on the deal, Institute for Energy Research (IER) has outlined that the pipelines, pump stations and processing plants necessary for the project will be jointly built by the two countries. The cost of this is expected to be US$ 70 billion.

Gazprom intends to spend US$ 55 billion and hire 11 700 people to build pipelines, gas processing plants and other infrastructure. Furthermore, according to Russian Energy Minister, Alexander Novak, China may make an advance payment of as much as US$ 25 billion toward the needed infrastructure in Russia.

Putin commented that the government in Beijing responsible for a second pipeline on its territory will spend at least US$ 20 billion on its construction. Russia and China are also expected to commence talks on a second pipeline to the west of the initial route.

The IER has highlighted that the infrastructure to be constructed will make Russia’s gas available not only to China, but also to Russia’s Pacific Ports, where it can be liquefied and sold to Japan, South Korea and other Asian markets. The plan includes an LNG plant in Vladivostok that would provide LNG to major port cities in China and the rest of Asia. This provides competition to US exports of LNG to Asia-Pacific.

A new security alliance?

There are political, as well as economic implications, of this supply deal for the West. China has used the announcement of the deal as an opportunity to call for a security alliance of Russia, China and Iran, arguably the West’s three most formidable opponents.

Meanwhile, this deal provides Russia with substantial stimulus for its economy, especially in poorer regions in Siberia and the Far East, to some extent undermining sanctions imposed by the West following the Ukraine crisis.

Edited from various sources by Emma McAleavey.

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