83% Of ‘Power Of Siberia’ Gas Pipeline Complete, Says Gazprom

Russian energy giant Gazprom has announced that the construction of 83 percent of the Power of Siberia gas pipeline, also known as Yakutia–Khabarovsk–Vladivostok pipeline, which will annually transport 38 billion cubic meters (bcm) of Russian gas to China, is complete and will being operations by the end of next year.

“By now, a total of 1,791 kilometers, or 83 percent of the linear section running from Chayandinskoye to the Chinese border in the Amur Region, is finished,” reads a company statement. “The bulk of construction and installation work for this section will be completed this year.”

Installation work, including pipeline tests, the installation of power supply equipment, communications, and telemetry systems, as well as start-up and commissioning, will take place in 2019.

The Power of Siberia gas pipeline measures roughly 3,000 kilometers, or 1,864 miles, and carries gas from eastern Siberia to Russia’s Far East region and China. The amount of gas passing through the pipeline will continue for 30 years, according to the Sales and Purchase Agreement inked between Gazprom and China National Petroleum Corporation (CNPC) in 2014.

Gas will be pumped from the Chayanda and Kovykta gas fields within the Irkutsk and Yakutia gas production centers and deliver it to Russia’s largest city on the Pacific coast, Vladivostok, via Khabarovsk. The $13 billion project is considered to be an expansion of the $55 billion Power of Siberia 2 project, also known as the Altai Pipeline, which was postponed in 2015.

The Chinese energy market will see the first supply from this route starting in December 2019, according to the Supplementary Agreement signed between Alexey Miller, Chairman of the Gazprom Management Committee, and Wang Yilin, Chairman of the Board of Directors of CNPC during a meeting that was held in Moscow in 2014.

“The signing of this document is a crucial step in the implementation of the project, a step achieved by Gazprom and CNPC thanks to clear and concerted action on both sides of the border,” said Alexey Miller at the time. “Our work is strictly on schedule, even ahead of schedule regarding Power of Siberia. Russian gas supplies to China will come right on time.”

China’s gas demand has put the country in the top 10 list, in terms of gas imports. The import is expected to grow by 13.4 percent and reach 105 bcm in 2018, according to China’s CNPC forecasts.

After an unexpected growth in oil prices in 2017, China faced necessity to increase its gas imports since the oil prices fluctuations affected the country’s crude oil imports.

Currently, China’s gas imports via pipelines mainly accounts for the Central Asian countries like Turkmenistan and for South East Asian state of Myanmar. Considering China’s growing gas demands, economic cooperation with its Russia’s partners plays a crucial role for China’s energy market.

Since 2003, China National Petroleum Corporation, the country’s biggest gas producer and importer, has established economic cooperation with Russian counterparts like Gazprom, Lukoil, Sakhalin Energy and Rosneft. However, the Power of Siberia gas pipeline - the first eastern pipeline - demonstrates Russia’s interest in diversifying its energy market eastward.

“The eastern route has the same strategic importance for Gazprom as the western,” said Gazprom’s deputy chairman Alexander Medvedev. “Having concluded a single contract, China equalled our largest European consumer.”