Russia and China agree key gas deal

• 9 years ago (2014-05-22)
• Junior Isles

Asia 850 Europe 1061

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Russia and China have finally signed a landmark energy deal this week which will see Gazprom provide natural gas to fuel China’s growing demand for the next 30 years.

Details of the deal have not been made public but analysts have hinted that China extracted good terms from Russia, which is particularly interested in looking east for new export markets to diversify away from its imperilled European business.

Negotiation insiders say that China has achieved close to its original terms and agreed to pay roughly $350 per thousand cubic metres (bcm), $30 less than Gazprom charges most customers in Europe, and equal to around $10 per million British thermal units.

The agreement came a day after a negotiation impasse foiled the chance to coincide the deal’s completion with a visit to China by Russian president Vladimir Putin.

The deal involves plans for Russia to develop gas fields in eastern Siberia in order to ship 38 bcm of gas per year to China’s northeastern regions by 2020, but both sides retain scope to expand the deal to up to 60 bcm of gas a year.

The initial deal would account for around 25 per cent of China’s current natural gas demand. However, will likely only meet about 10 per cent it by the time the fields and pipelines are expected to be operational in 2020.

The deal is not expected to directly impact on Russia’s current primary gas market in Europe as the newly opened gas fields in Russia’s far east are expected to be sufficient to supply Chinese demand.