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Russia insists on gas supplies to China at price comparable with European

October 24, 2011, 22:04 UTC+3

Deputy Energy Minister Anatoly Yanovsky said on Monday, October 24, that Russia continues to insist in the price of gas comparable to the European one

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MOSCOW, October 24 (Itar-Tass) —— Russia and China plan to conduct several rounds of talks on Russian gas supplies before the end of the year at the level of CNPC and Gazprom.

Deputy Energy Minister Anatoly Yanovsky said on Monday, October 24, that Russia continues to insist in the price of gas comparable to the European one.

“Certainly yes,” he said when asked whether Russia insists that the price of gas for China should be comparable to that for Western consumers.

Yanovsky recalled that the two counties have already agreed on the pricing formula and are now negotiating coefficients.

“Several more rounds of talks will take place before the end of the year,” he said, adding that they would be conducted at the level of corporations.

He does not rule out an agreement this year. “Everything is possible,” he said.

Gazprom insists that Russian gas be initially supplied to China via the “western corridor”, the company’s spokesman Sergei Kupriyanov said earlier.

“At this point, the western route is the only subject of negotiations,” he said after talks with China National Petroleum Corporation (CNPC).

China insists that gas be initially supplied by the eastern route, which is believes will reduce the cost of Russian gas supplies. At this point, the cost of Russian gas deliveries, including transportation, is close to China’s offer of 250 U.S. dollars per 1,000 cubic metres.

Negotiations between the two companies on this issue took place last week but produced no result.

The “western corridor” is the Altai gas transportation system that will supply gas from Gazprom’s gas fields. The “eastern corridor” can deliver gas from fields in Eastern Siberia and Sakhalin.

During a visit to China a week ago, Vice Prime Minister Igor Sechin said Russia and China should specify the “road map” for the gas talks within two weeks. “We believe that the parameters of cooperation should give due regard for the interests of both consumers and suppliers. We have agreed that within the next two weeks we will specify the ‘road map’ that will include the analysis of consumption, sources of supply and Gazprom’s place in this structure of supplies,” he said.

Gazprom is now exploring the possibility of exporting gas to China via two corridors in the total amount of up to 68 billion cubic metres.

The agreement on strategic cooperation between Gazprom and CNPC calls, among other things, for organisation by Gazprom of gas supplies to China. It was signed on October 14, 2004. In June 2009, the governments of Russia and China signed a memorandum of understanding for cooperation in the fields of natural gas.

In October 2009, Gazprom and CNPC signed a framework agreement on the main terms of natural gas supplies from Russia to China. In December 2009, they signed the basic terms of supply. But so far no agreement on the price of gas has been reached.

Gazprom and CNPC have set up a joint coordination committee that explores issues pertaining to the organisation of Russian gas supplies and conducts commercial negotiations on the price of supplies.

“Energy cooperation is one of the key areas of Russian-Chinese interaction. A joint project, Skovorodino-Daqing oil pipeline, has been commissioned. Other large-scale arrangements are being worked on, including natural gas supplies to China, cooperation in such sectors as atomic energy, coal industry, energy saving and energy efficiency,” presidential aide Sergei Prikhodko said earlier.

According to Sechin, there are two possible routes for gas supplies to China. The western route can carry about 30 billion cubic meters of gas a year, and the eastern one 38 billion cubic metres.

Gazprom and CNPC plan to sign an agreement up to 2030.

Gazprom earlier also confirmed that the gas purchase/sale agreement with China could be signed in the middle of 2011.

In October 2009, the two countries signed a framework agreement on the main terms and conditions of natural gas supplies form Russia to China. In December 2009, they signed the basic major terms of gas supplies to China, which however do not determine the final price of gas and its volumes. These issues are the subject matter of current negotiations.

Gazprom believes that the completion of the talks which Chinese partners and the signing of the gas purchase/sale agreement will accelerate the construction of the Altai gas trunk line from Western Siberia to China.

Gazprom CEO Alexei Miller said in December 2010 that his company planned to start the construction in the middle of 2011 and finish it by the end of 2015.

Energy Minister Sergei Shmatko said earlier that the Kovykta field was one of the possible sources of gas for China.

The Kovykta gas condensate field is one of the largest undeveloped gas fields in Eastern Siberia and located in the northern part of the Irkutsk region. The field was discovered in 1987. The reserves of Kovykta amount to 2,000 billion cubic metres of gas and more than 83 million tonnes of gas condensate. The period of active gas production in the Kovykta field is expected to be 30 years, and the period of field development is about 50 years.

The Kovykta field is to supply natural gas to China and Korea. According to these agreements signed by RUSIA Petroleum with China National Petroleum Corporation and Kogas on November 2, 2000, the annual export of gas to China and Korea will be 20 billion cubic metres and 10 billion cubic metres, respectively. The Kovykta field will also supply gas to the Irkutsk region through East Siberia Gas Company, a joint venture of Gazprom and the Irkutsk region administration.

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