Russia-China gas deal on "Power of Siberia-2" stalls

Russia-China gas deal on "Power of Siberia-2" stalls

Baku, Azerbaijan, August 29

By Aygun Badalova - Trend:

Neither China nor Russia is eager to go forward with the deal on the so-called western route for gas deliveries under the current situation on the oil market, Tao Wang, expert at Carnegie-Tsinghua Center for Global Policy told Trend.

"Given the current oil price and slow domestic growth in natural gas in China, neither side seems to be eager to sign the deal soon," Wang said.

But certainly that is the option that Russia prefers because it could absorb its surplus capacity and require less investment that the route of Power of Siberia, Wang believes.

"If it could played as a bargaining chip for China against the Central Asia gas from Turkmenistan for renegotiating the importing price, China may also find this route more valuable than before," Wang said.

The western route also known as Power of Siberia-2, is intended to run across the highly mountainous area of the Altai region in West Siberia to China and supply the Asian country with gas in the amount of 30 billion cubic meters a year.

On May 8, 2015 Gazprom and China National Petroleum Corporation (CNPC) signed a framework agreement on the main terms of gas deliveries via the western route.

Now the two sides have to prepare and conclude a contract. However the negotiations between the sides have become complicated due to sharp fall in oil prices.

Last month Chinese equity firms quietly suspended the second Siberian gas project, Power of Siberia 2, which was expected to supply 30 billion cubic meters (bcm) of gas a year to China. Russian media reports said the pipeline had been "delayed indefinitely."

At the same time last week Gazprom said that that the main terms and conditions of Russian gas supply to China via the western route had already been specified, for instance, a Russian-Chinese border crossing corridor for the future gas pipeline.

"The current project negotiations show a very good dynamics," Gazprom said.

From the middle of this year energy consumption in China started to slow down as a result of the country's financial problems. Revenues from China's industrial sector decreased 0.7 percent this year.

By 2020 gas demand in China will amount to 300 billion cubic meters which is 100 billion cubic meters lower than previously projected, according to the CNPC estimates.

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