Does China need more Russian gas via the Power-of-Siberia 2 pipeline?

Russian President Vladimir Putin held a meeting with his Chinese and Mongolian counterparts on Thursday, during which they discussed a major new infrastructure project, Power-of-Siberia 2, to deliver gas to China via the Mongolia.

Russia proposed the route years ago, but the plan has gained momentum as Moscow looks to Beijing to replace Europe as the main gas customer.

Negotiations will be complex, however, not least because China is not expected to need additional gas supplies until 2030, industry experts said.

HOW POWERFUL IS PIPELINE SIBERIA 2?

The proposed pipeline would transport gas from the huge reserves of the Yamal Peninsula in Western Siberia – Europe’s main source of gas supply – to China, the world’s largest energy consumer and growing consumer of gas.

The idea gained momentum when the first pipes of the currently operational Power of Siberia pipeline were laid in the Eastern Yakutia region of Russia in 2014.

This pipeline stretches 3,000 kilometers (1864.11 miles) through Siberia and into Heilongjiang Province in northeast China.

The new route would cross the eastern half of Mongolia and arrive in the Inner Mongolia region of northern China, not far from major population centers like Beijing, according to a map compiled by Russia’s Gazprom.

Gazprom started a feasibility study on the project in 2020 and aims to start delivering gas by 2030.

The 2,600 km pipeline could transport 50 billion cubic meters (bcm) of natural gas per year, according to Gazprom, slightly less than the Nord Stream 1 pipeline that connects Russia to Germany under the Baltic Sea.

WHAT DOES MONGOLIA SAY?

Mongolian President Ukhnaagiin Khurelsukh said on Thursday he supports the construction of oil and gas pipelines from Russia to China via Mongolia, adding that its technical and economic rationale should be studied.

Mongolian Prime Minister Oyun-Erdene Luvsannamsrai told the Financial Times in July that he expected Russia to start building the pipeline within two years.

Luvsannamsrai also said the final route of the line through Mongolia was not yet decided, according to the newspaper.

DOES CHINA NEED MORE RUSSIAN GAS?

Russia’s Gazprom is already supplying gas to China through the first Power of Siberia pipeline under a 30-year, $400 billion deal, which was launched in late 2019.

Scheduled to supply 16 billion cubic meters of gas this year, it will supply increasing volumes before reaching its full capacity of 38 billion cubic meters by 2025.

In February, Beijing also agreed to buy gas from Russia’s Far Eastern island of Sakhalin, which will be transported via a new pipeline across the Sea of ​​Japan to Heilongjiang province in northeast China. China, reaching up to 10 billion m3 per year around 2026.

Meanwhile, China is also negotiating a new gas pipeline – Central Asia – China Gas Pipeline D – to supply 25 billion cubic meters of gas per year for 30 years from Turkmenistan via Tajikistan and Kyrgyzstan.

In addition to piped gas, the country also has long-term contracts with Qatar, the United States and global oil majors for 42 million tonnes per year of liquefied natural gas (LNG) to be shipped on tankers, most procurement starting within the next five years.

“Basically, we see little support for Power of Siberia 2 to come to fruition before 2030, as China has already secured enough supplies,” said a Beijing-based industry expert who declined to be named. due to company policy.

“It will be an extremely complex negotiation that could take years, as it involves enormous political, commercial and financial risks,” the expert said.
Source: Reuters (Reporting by Aizhu Chen in Singapore; Writing by Dominique Patton; Editing by Ana Nicolaci da Costa)

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