Alexey Miller and Zhang Gaoli discuss gas supplies to China from Russia’s Far East

RELEASE

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Zhang Gaoli, First-ranked Vice Premier of the People's Republic of China, took place today in Beijing.

The meeting addressed a wide range of issues pertaining to strategic cooperation. Particular attention was paid to Russian gas exports to China, especially the progress in the establishment of the eastern route and the prospective project for gas supplies from Russia's Far East.

Also today, a working meeting was held between Alexey Miller and Wang Dongjin, Vice President of CNPC and President of PetroChina. The parties discussed the arrangement of gas exports from Russia's Far East to China and reaffirmed their commitment to set out the modalities by the end of this year.

The meetings also touched on such subjects as the project for gas deliveries via the western route and joint efforts regarding gas storage, gas-fired power generation, and the use of natural gas as a vehicle fuel, including through the development of the Europe – Western China international transport route.

As noted by Alexey Miller, “since early 2017, China's gas demand has grown significantly; according to the latest data, in January-July alone gas consumption in China added 16 per cent compared to the same period of last year. That growth is mainly caused by the campaign for converting industrial consumers from coal to natural gas in order to fight air pollution in China. Seeking to meet the demand, China increases its gas imports considerably. In January-July, gas imports totaled 51 billion cubic meters, an increase of 20 per cent, or 9 billion cubic meters, in the span of six months. The share of imports in the country's gas balance is rising; it is currently at 38 per cent. Faced with some volatility in pipeline gas supplies from Central Asia – certain countries did not deliver in January-April – LNG procurements exhibited growth, including under spot contracts, of 140 per cent.

China's stated aims for gas industry development up to 2020 (with the share of gas in the energy mix reaching 8–10 per cent and UGS capacity doubling), coupled with CNPC revising upward its forecasts for gas consumption up to 2030 (620 billion cubic meters compared to last year's forecast of 510 billion), create great potential for deepening cooperation with Gazprom.”

Background

Gazprom's main partner in China is CNPC, a state-owned oil and gas company.

On May 21, 2014, Gazprom and CNPC signed the Sales and Purchase Agreement for gas to be supplied via the eastern route (Power of Siberia gas pipeline). The 30-year Agreement provides for Russian gas deliveries to China in the amount of 38 billion cubic meters per year.

In 2015, Gazprom and CNPC inked the Heads of Agreement for pipeline deliveries of natural gas from Western Siberian fields to China via the western route (Power of Siberia 2 gas pipeline) and the Memorandum of Understanding for the project of pipeline gas supplies to China from Russia's Far East.

In 2016, Gazprom and CNPC signed the Memorandum of Understanding on underground gas storage and gas-fired power generation in China and the Memorandum to explore the opportunities for cooperation in the NGV sector.

On May 15, 2017, Gazprom, Avtodor, and China Communications Construction Company Ltd. inked the Memorandum of Cooperation to develop road infrastructure of the Europe – Western China international transport route.

On July 4, 2017, Gazprom and CNPC signed the Supplementary Agreement to the Sales and Purchase Agreement for gas to be supplied via the eastern route inked in 2014. According to the document, gas supplies will commence on December 20, 2019.

 

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