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Russia agrees gas pipeline deals with China

World Pipelines,

Russia has agreed to supply natural gas to China via two pipelines, as the two countries promised to foster energy co-operation.

Supplying China
Russia is to supply natural gas to China via two Gazprom pipelines from Western Siberia and the offshore Sakhalin fields. The pipelines would be capable of supplying China with 68 billion m3/yr of natural gas, which represents 85% of the gas China currently consumes.

Russian Prime Minister Vladimir Putin made a three day visit to Beijing, to meet with his Chinese counterpart Wen Jiabao.

Russia’s Gazprom and China National Petroleum Company (CNPC) signed an energy agreement setting a framework for final price negotiations.

Russia’s RIA Novosti news agency quoted Gazprom head Alexei Miller as saying the framework deal “envisages options of western and eastern routes”. Gazprom already has extensive infrastructure in place to transport gas westwards. Russia is to hold negotiations on pricing and delivery until 2010. First gas is predicted for delivery in 2014 or 2015. Beijing is gradually replacing coal with cleaner-burning gas.

Sourcing the gas
More than half the gas Russia has promised to China would come from the yet-unexplored gas fields in eastern Siberia. Russia has recently expressed a desire to attract foreign cash and expertise in developing these fields, which would require multi-million dollar investments.

Energy co-operation
In April, the two countries signed agreements on oil co-operation, and a memorandum of understanding on natural gas followed in June. Chinese Vice-Premier Wang Qishan met with Russian Deputy Prime Minister Alexander Zhukov earlier this week, and later told reporters that the China-Russia oil pipeline project was going well, with the loan pledged by China already implemented. Construction of the China section of an oil pipeline from Siberia began in May. The Skovorodino-Daqing line is expected to go into operation by the end of 2010, carrying 15 million tpy from Russia to China.

The two countries are also believed to be co-operating on building a refinery in China.

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