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China-Russia gas deal set to be signed

By Du Juan | China Daily | Updated: 2014-05-16 07:14

Officials expect to finalize agreement during Putin's official visit next week

China and Russia have agreed on most of a deal for natural gas delivery and cooperation on other projects. It will be signed during Russian President Vladimir Putin's visit to Beijing next week, a senior Chinese official said on Thursday.

Companies from both sides are finalizing the gas contracts in Moscow, and the aim is to sign them during Putin's visit, Deputy Foreign Minister Cheng Guoping told a press briefing.

Putin will attend a summit of the Conference on Interaction and Confidence Building Measures in Asia from May 20 to 21 in Shanghai. It's his first trip to China since his opposite number, President Xi Jinping, took office.

Russia faces Western sanctions after it incorporated Ukraine's Crimea region this year. Russia is looking to Asian markets to reduce dependency on Europe as a buyer of energy. It's "100 percent" that China and Russia will sign a gas deal, Sergey Pikin, director of Russia's Energy Development Fund, said in late April.

Russia's top natural gas producer, Gazprom OAO, plans to supply China with 38 billion cubic meters of gas annually starting from 2018 and increase it to 68 billion cubic meters. The fuel will be supplied through China's western and eastern pipelines. No timetable has been specified for the increased supply.

A person at China National Petroleum Corp, the nation's biggest natural gas importer, told China Daily that the price of delivered gas is being discussed and has been the stumbling block in talks.

Sun Yongxiang, a researcher with the Development and Research Institute of the State Council, China's cabinet, said the price may be around $400 per 1,000 cubic meters, which is close to Russia's demands.

"This estimated price is higher than our expectation," said Wang Ruiqi, senior analyst with Shanghai-based energy consultancy ICIS-C1 Energy.

She said even if China can seal the deal with Russia, the nation still needs to diversify its energy supply.

"Pipeline construction will take two to three years while China's gas demand will continue to increase rapidly as the urbanization and industrialization processes go on," Wang said.

China became the third-largest natural gas user in 2013 with total consumption of 167.6 billion cubic meters, up 13.9 percent year-on-year, according to data from CNPC.

In addition to the pipeline's supply, CNPC signed a deal with the Russian government to acquire a 20 percent stake in the country's Yamal liquefied natural gas project. It's part of Chinese moves to raise its clean energy imports.

The company said the transaction was completed on Jan 14.

Last October, CNPC agreed to buy 3 million metric tons of liquified natural gas a year from Yamal LNG. The deal took effect this year.

The Yamal LNG project is located on the Yamal Peninsula in Northern Russia. It is a joint venture between Russia-based Novatek Inc, which owns 60 percent, France-based Total SA with 20 percent and CNPC, also with a 20 percent stake.


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