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Russia’s Gazprom, China’s CNPC cannot strike deal because of pricing policy in China

August 02, 2013, 19:53 UTC+3

If China followed the market model, Gazprom’s deputy CEO noted, it would be much easier to conduct negotiations

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MOSCOW, August 2 (Itar-Tass) - Russia’s national gas utility Gazprom cannot reach a mutually beneficial contract with China National Petroleum Corporation (CNPC) because of China’s pricing policy.

“We consider China’s market, like the markets of other Asia Pacific countries, as the most dynamically developing and most attractive,” Gazprom’s deputy CEO Alexander Medvedev told the Russia Today television channel on Friday. “The cause of delays in the negotiating process - and so far we have no actual results - is very simple: China is still regulating and subsidizing gas prices.”

If China followed the market model, he noted, it would be much easier to conduct negotiations. “But the gap between China’s domestic prices and market prices in the region, including on imported liquefied natural gas, makes it impossible to reach a mutually beneficial solution,” Medvedev said. “The price situation in China is inadequate to market conditions.”

In October 2009, Gazprom and CNPC signed a framework contract on key terms for the supply of Russian natural gas to China. It provided for annual exports of up to 68 billion cubic meters of gas. In September 2010, the sides signed extended terms for gas supplies to China. In March 2013, Gazprom and CNPC signed a memorandum of understanding on cooperation on the project of pipeline gas supplies via the eastern route. Gazprom then said a countract would be signed by the end of 2013. But negotiations on the pricing formula are still underway.



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