Translated material
Priceless conditions
Gazprom and CNPC are in no hurry to agree on the main thing
During the official visit of Russian President Dmitry Medvedev to China, which begins on September 26, Gazprom and CNPC will sign “Extended conditions for gas supplies to China.” As the deputy chairman of the board of the Russian concern, Alexander Medvedev, said following the results of the next round of negotiations with the vice-president of the Chinese corporation Wang Dongjin in Beijing, the document “will form the basis of the future contract.” Despite the improvement in bilateral relations in the energy sector (the parties were unable to reach a common denominator in the spring), they again failed to agree on the key issue - the price of gas for China. In turn, Russian Deputy Prime Minister, co-chairman of the Russian-Chinese energy dialogue Igor Sechin said that July of next year has been set as a new deadline for overcoming price differences.Nevertheless, the parties have not yet abandoned the idea of launching pipeline gas supplies from Russia to China in 2015. In addition to the commercial meeting, a regular meeting of the joint coordinating committee of Gazprom and CNPC was held in Beijing, in which the Russian company is represented by another deputy chairman, Alexander Ananenkov, who is responsible not for marketing, but for gas production and transportation. The committee has not met for exactly a year since, on the eve of Prime Minister Vladimir Putin’s visit to China, it initialed a document on the terms of gas supplies. In October last year, after signing this agreement, Mr. Putin even said that the Chinese partners had agreed on a price formula for Russian gas tied to the cost of oil in the Asia-Pacific region, and Mr. Sechin promised to reach final agreements in the first or second quarter of 2010.
Now the situation is repeating itself, although there were certain prerequisites for a breakthrough. Moscow is under pressure from the European Union, which, against the background of frankly bad conditions on the gas market, is trying to dictate its own rules of the game. It is not surprising that, as part of negotiations with Chinese partners, the Altai gas pipeline project came up again, which involves transporting 30 billion cubic meters of gas from existing fields in Western Siberia to China. That is, those that are the resource base for supplies to Europe through the existing gas transportation system. The idea is simple - since the Europeans are in no hurry to sign new contracts with Gazprom and, moreover, complicate activities under already concluded agreements, competition for this resource base will not hurt at all.
The problem, however, is that this project can only be repaid if China is ready to buy gas at European prices. Otherwise, you may find yourself in the position of Turkmenistan, which, having extracted extremely favorable terms for the sale of its gas from Russia, did not abandon the project of exporting to China via a new pipeline and is now forced to sell raw materials at the border much cheaper than it could under the previous Gazprom contract.
China also needs new sources of pipeline gas supplies. 40 billion cubic meters of Central Asian gas and imports of 30-40 billion cubic meters of liquefied natural gas do not meet the strategic goals of Beijing, which announced its intention to increase gas consumption to 300 billion cubic meters by 2020 (last year the market volume was 88 billion cubic meters). The potential for growth in domestic production in the natural gas sector today is practically exhausted (which is worth the acute territorial confrontation with Japan over the shelf area), and the extraction of methane from unconventional sources is still in the experimental phase and cannot serve as a guarantor of energy security. But Beijing will not rush. The need to contract gas in Russia “tomorrow” has not yet arrived.