Russia, China to negotiate on western gas pipeline route

Russia and China may complete negotiations on building an additional natural gas pipeline to China, which will deliver energy via a western route by 2015, Russian Prime Minister Dmitry Medvedev said.

The final details on constructing the second pipeline will hopefully be agreed within the next year, Medvedev said at a meeting with his Chinese Premier, Li Keqiang.

“We would like to come to an agreement in the next year,” the Russian Prime Minister said, but made no comment on any of the business details.

Altai pipeline

Gazprom has already outlined a project called 'Altai' a yet-to-be-built pipeline that will connect fields in Western Siberia with Northwest China through the Altai Republic and deliver 30 billion m³/yr of gas. Gazprom and CNPC inked a framework agreement for the Altai project in October 2009 after beginning negotiations in 2004. The passage will be in addition to the eastern pipeline, Power of Siberia, which will deliver 38 billion m³/yr.

“Both us and our Chinese partners have stated that we are activity involved in the negotiation process,” Medvedev said.

When the Western (Altai) route is completed, China will become Russia’s biggest gas customer. The ability to supply China with 68 billion m³/yr of gas far surpasses the 40 billion m³/yr it supplies Germany each year.

Russia looks East

As its relationship with the West worsen, Russia is pivoting east in an attempt to secure business with China. Chinese Premier Li Keqiang is in Moscow for a meeting with his Russian counterpart Dmitry Medvedev.

Medvedev said ahead of the meeting China was Russia's "first foreign trade partner," adding the volume of bilateral trade between the two countries doubled in the last six years.

The two are hoping to sign dozens of trade pacts, including a huge gas deal agreed in May.

Under the 30 year deal, Russian state-owned energy giant Gazprom will supply 38 billion m³/yr of gas to China each year starting 2019. That is around 10% of all Gazprom's sales.

Russia is hoping its economy will get a boost from its relationship with China. Sanctions imposed on Russia by Western countries in the light of the conflict in Ukraine have slowed down its economic growth.

The deal brings a steady energy source for energy-hungry China, which is struggling with major pollution problems, given its heavy reliance on coal for generating power. The contract will provide a key source of energy to sustain industrial and economic growth.

More importantly, Russia gains a market at a crucial time as European customers slip out of its hand, due to sanctions following the Ukraine crisis. The sanctions forbid European and US oil firms such as ExxonMobil Corp., BP plc and Royal Dutch Shell plc from having any new energy-related transaction with Russia.

Edited from various sources by Elizabeth Corner

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