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Putin and Gazprom top managers discuss gas giant’s eastern projects

July 02, 2014, 13:10 UTC+3 MOSCOW
The meeting focused on the implementation of agreements reached with China as part of Vladimir Putin’s recent visit
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Gazprom CEO Alexei Miller (left) and Vladimir Putin

Gazprom CEO Alexei Miller (left) and Vladimir Putin

© ITAR-TASS/Alexei Nikolsky

MOSCOW, July 02. /ITAR-TASS/. Russia’s President Vladimir Putin has met with Gazprom CEO Alexei Miller and Gazprom Export Director-General Yelena Burmistrova over the Russian gas giant’s eastern projects.

“The meeting focused on the implementation of agreements reached with China as part of Putin’s recent visit, and a wide range of issues related to cooperation between Gazprom and foreign partners,” presidential spokesman Dmitry Peskov said on Wednesday.

Russia’s Gazprom and China’s CNPC (China National Petroleum Corporation) signed a contract on Russian gas supplies on May 21. The contract was concluded for 30 years and envisages annual delivery of 38 billion cubic meters of gas. The contract cost totals $400 billion.

In October 2013, Russian Energy Minister Alexander Novak said Gazprom and CNPC should sign the contract before the end of 2013.

In March 2013, the two companies signed a memorandum on pipeline gas supplies from Russia to China using the “eastern route”. Miller said back then that gas supplies to China could be prepaid. Given the cost of the gas transportation system to the Chinese border preliminarily appraised at 770 billion rubles, an advance payment could be as big as $25 billion.

In June 2013, CNPC came up with new pricing proposals, suggesting that the price of gas be pegged to the value of Henry Hub liquefied natural gas. But Gazprom said it was not ready to do that.

Infographics Supplies of Russian natural gas to China Supplies of Russian natural gas to China
May 21, 2014, Gazprom and CNPC have signed a deal on gas supplies to China
The “eastern route” is an extension from the Sila Sibiri (Power of Siberia) gas pipeline.

The main parameters of supplies are: crossing point in Blagoveshchensk; volume of supply 38 billion cubic meters with a possible increase to 60 billion cubic meters; start of supply 2018.

Over the past 10 years, natural gas consumption in China has increased from 24 billion to 100 billion cubic meters a year. There are several possible routes for bringing gas to China. Gazprom insisted that Russian gas be initially supplied to China via the “western route”.

China insisted that gas be initially supplied by the eastern route, which, as it 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 per 1,000 cubic meters.

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

The agreement on strategic cooperation between Gazprom and CNPC was signed on October 14, 2004. In June 2009, the governments of Russia and China signed a memorandum of understanding for cooperation in the field of natural gas.

CNPC is China’s largest petroleum company wholly-owned by the state and is one of the world's leading integrated oil and gas production companies.

In October 2009, Gazprom and CNPC inked the Framework Agreement on the major terms and conditions of natural gas supply from Russia to China. The Agreement stipulates annual exports of up to 68 billion cubic meters of gas to the Chinese market. In September 2010 the Extended Major Terms of natural gas supply from Russia to China were signed.

In September 2013, Gazprom and CNPC inked the Agreement on the major terms and conditions of pipeline gas supply from Russia to China via the eastern route.

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