Russia to focus on Asian gas market?

Oil&Gas Materials 9 December 2015 17:28 (UTC +04:00)

Baku, Azerbaijan, Dec. 9

By Aygun Badalova - Trend:

Deterioration of relations between Turkey and Russia, which has lead to the cancellation of the Turkish Stream gas pipeline project, raised a question regarding Russia's future gas strategy.

Some experts think that after the Turkish Stream's fail and the EU's opposition to the Nord Stream 2 project, Russia will be now more focused on the Asian gas market.

"With Turkish Stream on the shelf, and Ukraine and others objecting to Nord Stream 2, it does seem that Gazprom's 'pivot' to Asia takes on added geopolitical importance for Russia, as well as commercial importance for Gazprom," Andrew Neff, principal analyst with the IHS Petroleum Sector Risk team told Trend.

Gazprom this year has already expressed its intention to pursue Eurasian gas strategy. The company doesn't plan to extend the contract for gas transit to Europe through Ukraine's territory after 2019.

Earlier, the source in Gazprom told Trend that the intensive work in the Asian direction will allow the company to diversify the export portfolio.

Russia has been already negotiation with China over the gas supplies via the Altai pipeline - also known as Power of Siberia 2.

Neff believes that now talks on the Altai/western pipeline from Russia to China are sure to take on some added urgency from Gazprom's perspective.

"But with China's economic slowdown, as well as new LNG coming onstream from Australia and elsewhere in Asia, he said, it's hard to see China seeing the same sense of urgency from the demand side," he said.

"Plus, new import capacity is already just now coming onstream from the Kazakhstan-China gas pipeline link to the Central Asia-China trunkline, with which Russian gas exports from the west would have to compete," he added.

Russia seems like it has more incentive to speed up talks with China, according to Neff.

"But I'm not sure that I see China having the same incentives at this point - so the Chinese have more leverage in price talks since they are less determined to see the project through to fruition," he said.

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.

Reportedly, the deal on the Power of Siberia 2 is expected to be signed next year.