Power of Siberia gas pipeline to China on track for 2019, claims Gazprom CEO

Power of Siberia routeRussia is on track to start supplying China with gas via the 3,000km-long Power of Siberia pipeline by December 2019, Gazprom’s CEO Alexei Miller said this week, although more than 2,000 km of the pipeline remains to to be built. Miller made his pledge during Chinese President Xi Jinping’s official visit to Russia where he and President Vladimir Putin watched as Miller and CNPC Chairman Wang Yilin signed a Supplementary Agreement to their original 2014 30-year contract for the annual overland supply of more than 38bn cubic metres of gas.

“The signing of this document is a crucial step in the implementation of the project, a step achieved by Gazprom and CNPC thanks to clear and concerted action on both sides of the border,” Miller said.
The project, which will cost Gazprom more than $55bn just to build the necessary infrastructure to get the gas flowing, is one of the most critical investments for Russia’s energy sector, which has targeted a long-term strategic supply link with China to match its market penetration in Europe. “It is hugely important for both. For Gazprom, it basically opens up a huge, rapidly growing market,”senior research analyst at energy consultancy Wood Mackenzie Kateryna Filippenko, told the FT. “And more importantly, it allows them to monetise gas fields that otherwise would be left untouched.” 
Among these fields are the large deposits in Russia’s Far Eastern territories which are currently too expensive and too far away to be used to profitably supply Europe.
The pipeline is also being cited as a key example of growing business links between Russia and China; Russia’s largest oil company Rosneft recently sold a stake in one of its projects to a Chinese gas company, and said this week that it was also in talks to sell a stake in its retail business to China Energy Company. The state-owned China National Petroleum Corporation, meanwhile , owns a 20% stake in a $27bn liquid natural gas project in Russia’s Yamal region, while Gazprom itself took a €2bn loan from Bank of China last year. The Power of Siberia is expected to run significantly below maximum capacity in its first few years of operation, as China instead runs down its domestic gas reserves, and the 30-year supply agreement is set to kick in around 2025.
Gazprom is also in talks with China regarding a broader supply agreement, according to Miller, and the company is planning to build a second pipeline to China across the small border between Mongolia and Kazakhstan, supplied from fields in western Siberia which would then have pipeline access to both the European and Chinese markets.

Source: www