China Is Gazprom’s ‘New Europe’

Following almost two decades of negotiation, Russia and China have agreed a deal to supply 38 billion cubic meters (bcm) per annum of gas from Gazprom’s East Siberian fields into China via the Power of Siberia pipeline. Details on pricing and the timing of first deliveries for this landmark deal are not clear but first gas is expected through the Power of Siberia in 2020.

Stephen O’Rourke, Global Gas Research Analyst for Wood Mackenzie says; “The agreement not only establishes a new gas production centre in East Siberia for Gazprom but provides the company with pipe export growth and market diversity away from its legacy European customers. With European gas demand growth uncertain and the Ukraine crisis leading to calls for Europe to reduce its reliance on Russian gas, Gazprom now needs a ‘new Europe’- enter China.”

“The comparisons with the development of Gazprom’s export business into Europe are clear, with almost identical population sizes between North East China and Western Europe. Gazprom’s exports to Western Europe first reached 38 bcm by the mid-1980s and have since increased to over 150 bcm into the whole of Europe. We anticipate overall gas demand from China over the next two decades will grow more rapidly than that witnessed in Europe from the mid-1980s,” Gavin Thompson, Head of Asia Gas Research for Wood Mackenzie adds.

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Press Release, May 22, 2014; Image: Gazprom