Global Energy Studies Centre: Russia's gas plans on China may fail
Azerbaijan, Baku, Nov. 19 / Trend A.Badalova /
An opportunity for Russia to secure a long-term, high volume gas sales deal with China may never be realized, analysts of the Global Energy Studies Centre (CGES) believe.
"The final steps needed to make the deal a reality have so far proved impossible to make," CGES report said. The centre's analysts believe that there are several key reasons for that.
Analysts stressed that Russia's Gazprom is insisting that prices be linked to those for oil and that the netback it receives from deliveries to China, after subtracting transportation costs from the selling price, should be equal to those that it receives for deliveries to Europe.
The second reason for the failure of russian-chinese gas deal may be cheaper gas that China gets from the Central Asia.
"The government is in no hurry to sign long-term supply deals with Russia while it has access to relatively cheaper Central Asian gas, CGES analysts said. Chief among these has been the construction of pipelines to carry gas from Central Asia all the way to the Chinese coast and heavy investment in gas production in Turkmenistan.
Analysts mentioned that China has ambitious plans to sharply increase domestic shale gas output in the coming decade. The production target is 6.5 billion cubic meters (bcm) per annum by 2015 amd up to 80-100 bcm by 2020. The aim is to make the share of shale gas to amount to 8-12 percent of annual Chinese natural gas output by that time.
This month Gazprom stated that Russia may increase its gas exports to the Asian - Pacific region up to volumes, equal to Russian supplies to Europe.
Reportedly, at present, gas supplies from Russia in the amount of 68 billion cubic meters are being discussed with China.
Commercial negotiations on the terms and conditions of natural gas supplies to China have been held since late 2005. The state-owned petroleum company CNPC participates in the negotiations on behalf of the Chinese party.
In October 2009 Gazprom and CNPC inked the Framework Agreement on major terms and conditions for natural gas supply from Russia to China. In December 2009 the Basic Major Terms of Gas Supply from Russia to China were signed.