Oil & Gas

Russia Eyes Gains As Xi-Putin Sign Power-of-Siberia 2 Gas Deal

 

China’s President Xi Jinping and Russia’s President Vladimir Putin set their sights on shaping a new world order as the Chinese leader left Moscow on Wednesday, after two days of talks and a series of deals to cement their “no limits” partnership.

As Xi departed he told Putin: “Now there are changes that haven’t happened in 100 years. When we are together, we drive these changes.”

“I agree,” Putin said, to which Xi responded: “Take care of yourself dear friend, please.”

 

Also on AF: Xi Heaps Praise on Putin in Moscow, Attracts White House Ire

 

The two leaders signed a series of documents on a “strategic cooperation” at close of talks on Tuesday. The deals followed what Putin described as “successful and constructive” talks showing China was clearly now Russia’s most important economic partner.

Moscow is ready to help Chinese businesses replace Western firms that have left Russia over the Ukraine conflict, Putin told Xi during talks at the Kremlin.

As part of their growing partnership, Xi and Putin also discussed a major new infrastructure project, Power-of-Siberia 2, to deliver gas to China via Mongolia.

Putin said Russia, China and Mongolia had completed “all agreements” on finishing the pipeline to ship Russian gas to China.

Russia will deliver at least 98 billion cubic meters (bcm) of gas to China by 2030, he said. However, a subsequent Russian statement said some details still need to be resolved.

While Russia proposed the route years ago, the plan has gained urgency as Moscow looks to Beijing to replace Europe as its major gas customer.

Meanwhile, China is not expected to need additional gas supply until after 2030, experts say.

 

What is the Power-of-Siberia 2 pipeline?

The proposed pipeline would bring gas from the huge reserves sitting underneath the Yamal peninsula in west Siberia, to China, the world’s top energy consumer and a growing gas consumer.

The first Power-of-Siberia pipeline runs for 3,000 km (1,865 miles) through Siberia and into China’s northeastern Heilongjiang province.

The new route would cut through eastern Mongolia and into northern China, according to a map by Russia’s Gazprom.

The 2,600-km pipeline could carry 50 billion cubic metres (bcm) of gas a year, slightly less than the now defunct Nord Stream 1 pipeline linking Russia to Germany under the Baltic Sea.

 

Chinese President Xi Jinping and Russian President Vladimir Putin attend a welcome ceremony before talks at the Kremlin. Photo: Sputnik via Reuters

 

 

Why China needs caution

Gazprom already supplies gas to China through the first Power-of-Siberia pipeline under a 30-year, $400 billion deal, which was launched at the end of 2019.

Expected to supply 22 bcm of gas in 2023, it will deliver increasing volumes before reaching full capacity of 38 bcm by 2027.

In February 2022, Beijing also agreed to buy gas from Russia’s Far East island of Sakhalin, which will be transported via a new pipeline across the Japan Sea to China’s Heilongjiang province. This pipeline will reportedly reach a capacity of approximately 10 bcm a year by around 2026.

China is also negotiating a new pipeline – the Central Asia–China Gas Pipeline D – to source 25 bcm of gas annually for 30 years from Turkmenistan via Tajikistan and Kyrgyzstan.

Additionally, China has long-term contracts with Qatar, the United States and global oil majors for LNG supplies. It imported 63.4 million tonnes of the chilled fuel last year.

“The original target is for China to import 38 bcm of Russia gas by 2025. Now Russia is saying this will reach 98 bcm by 2030. That is a very big jump, so it pays to be slightly cautious on that,” said Wang Yuanda, China gas analyst at data intelligence firm ICIS.

China will also be wary of finding itself in a similar position to Europe if it becomes more reliant on Russia, he added.

 

What Xi said about the pipeline

Official accounts of Xi’s statements issued after the meetings do not mention the pipeline.

“We don’t really think it’s finalised yet, there are still lots of finer details to be hammered out,” added Wang Yuanda.

“Russia is probably more desperate to sell gas than China needs at the moment.”

Before Xi’s visit, Putin had referred to the Power-of-Siberia pipeline as “the deal of the century.”

 

  • Reuters, with additional editing by Vishakha Saxena

 

Also read:

Xi Arrives in Moscow Just as Putin Becomes War Criminal

China Says Trade with Russia Rose to New Peak in 2022

Russia Ships Sanctioned Oil to Asia in Chinese Supertankers

Chinese Firm in Talks to Sell Military Drones to Russia: Report

US Warns China Will Face ‘Real Costs’ for Lethal Aid to Russia

India-Russia Oil Deals Erode Dollar’s Currency Dominance

 

 

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at vishakha.saxena@asiafinancial.com

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