Putin instructed the go-ahead for both the liner part of the pipeline and the resource bas creation, allowing Gazprom to start the pre-investment phase and design-and-survey works. Under the Russia-China gas deal, supplies are being delivered at an estimated price of $350-$400 per thousand cubic meters.
Power of Siberia 2 allows for pipeline gas deliveries from Russia’s Western Siberian fields to China, complementing the eastern route - the initial Power of Siberia gas pipeline - which already supplies 38 Bcm/y under a 30-year sales and purchase agreement between Gazprom and CNPC.
China lifts lockdown but energy demand stays low
Analysts doubt, however, that China will need much additional natural gas supplies in the short- to medium-term as the country is slowly recovering from the coronavirus pandemic. Though manufacturing is resuming, the tepid recovery still needs to translate in a substantial rise in energy demand.
The rebound is patchy, our LNG Unlimited data shows, with imports recovering from less than 0,8 million tons at the height of the pandemic in China to 1,06 million tons in the last week of February – just to fall off again to less than 0.9 million last week.
Power generation in China notched up March, after falling by a staggering 8.2% in January and February when the country was on lockdown to contain the coronavirus pandemic. Factory output in the first two month of 2020 turned out 13.5% lower from the pre-year period, while retail sales plunged by 20.5%, according to government data.
V-shaped recovery deemed ‘unlikely’
Early signs of China’s economic recovery were overrated by analysts in the hope of a quick rebound in oil and gas demand of the world’s largest commodities buyer. However, the Shanghai Petroleum & Natural Gas Exchange cautioned that the oversupply situation remains relatively unchanged; hence LNG imports are expected to remain sluggish through April.
The Chinese government has resorted to a range of fiscal stimuli to jumpstart economic activity, including cutting electricity tariffs by 5%. Analysts are unimpressed, saying “a V-shaped recovery remains unlikely” and Kpler ship tracking data indicates there will be year-on-year cargo losses in March.
Demand destruction is particularly striking when it comes to natural gas. China’s LNG imports growth slumped to 2.3% in January and February, down from 19% in the same period last year. China imported 11.13 million tons of LNG in the first two months of this year, up 2.3% year on year, latest data released by the General Administration of Customs shows.