‘Power of Siberia’ is a 3,000 kilometer pipeline link, running from east Siberia to the Blagoveshchensk on the Chinese border. The pipeline launch on December 2 crowns years of difficult construction work and tough commercial negotiations over the price of gas supplies.
Though the pricing formula is kept confidential, it is known to be linked oil prices. The base price in the formula was set at about $360 per thousand cubic meters, Russian officials disclosed, noting this was similar to the level of Gazprom’s supply contracts to Germany.
PetroChina said the price of Russian gas supplied via Power of Siberia is competitive with deliveries from Central Asia, notably from Turkmenistan.
Talks about a Far Eastern route
Negotiations are already being held with CNPC and the Chinese government about the possibility to boost Russian supplies through new projects – Power of Siberia 2 – and through the Far Eastern route.
Shortly after the launch, Gazprom noted that Chinese gas demand surged some 10 percent and considerably exceeded 300 billion cubic meters (Bcm) in 2019. “This is why we are discussing with our Chinese partners the possibility of supplies via other pipeline routes,” Gazprom chairman Alexey Miller told shareholders.
“If new projects are implemented by 2035, the share of Gazprom's supplies could rise to 13% in consumption and to 25% in gas imports, and our company may become the largest supplier on the Chinese market," he outlined.
Russian gas competes with spot LNG
Gazprom’s strategic turn to China - the world’s fastest growing gas market - helps the Russian state-controlled energy major to reduce dependence on its traditional European buyers. Deliveries through the ‘Power of Siberia’ gas pipeline are meant to be cheaper for Chinese buyers than spot LNG cargoes.
The volumes of Russian gas to be exported to China are coming from the Chayandinskoye field in Yakutia and the Irkutsk-based Kovyktinskoye field, Gazprom said, noting these supplies will feed to the China link from around mid-2023.
