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Gazprom Is Halfway To China With Power Of Siberia Gas Pipeline

By Vusala Abbasova March 2, 2018

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Gazprom, which holds 17 percent of the world’s largest natural gas reserves, will supply China with 38 billion cubic meters (bcm) of natural gas per year via the Power of Siberia pipeline

The Chinese energy market will get a power surge as its Russian suppliers complete the Power of Siberia pipeline, also known as Yakutia–Khabarovsk–Vladivostok pipeline, now halfway complete, and supply China with 38 billion cubic meters (bcm) of natural gas.

"As of middle February, we have already built 1,521 kilometers of the pipeline," said in the company’s statement, according to TASS news agency. The pipeline is expected to go online by December 2019.

The 3,000 kilometer long (1,864 mi) pipeline will pump natural gas from the giant Chayanda oil and gas condensate deposit in Yakutia, and the Kovykta gas condensate field in the Irkutsk region, and deliver them to Russia’s Far East region via Khabarovsk and onwards to Vladivostok, Russia’s largest city on the Pacific coast.

The pipeline was begun in 2014, after a deal was signed between Gazprom, which holds 17 percent of the world’s largest natural gas reserves, and China’s largest state-owned oil and gas company China National Petroleum Corporation (CNPC), lasting 30 years.

The Power of Siberia pipeline, at a cost of about 770 billion rubles ($13 billion), is an expansion of Altai Pipeline, also known as Power of Siberia 2, which was postponed in 2015.

China, which is in the top 10 both in terms of natural gas consumption and imports, is expected to show the strongest demand for growth in natural gas consumption by 2040, according to the U.S. Energy Information Administration (EIA). China’s natural gas consumption is supposed to see growth by 10 percent and imports by 13.4 percent, and reach 258.7 bcm and 105 bcm, respectively, according to China’s CNPC forecasts.

Cooperation between the world’s third largest oil company CNPC and its Russian counterparts dates back to 2003, when China's largest oil and gas pipeline contractor and operator established rapport with Russian energy companies as Gazprom, Sakhalin Energy, Lukoil and Rosneft.

China’s natural gas imports soared to a record in December 2017, as the country’s crude oil imports saw a sharp decline in view of the increase in oil prices, after six Arab countries announced that they were to break diplomatic ties with Qatar, accusing it of supporting terrorism.

As a result, China’s gas imports that month came in at 7.89 million tons, 20 percent above November’s previous record of 6.55 million tons. The country’s imports for the whole of 2017 jumped 27 percent from 2016 to a record of 68.57 million tons, according to the General Administration of Customs.

“Russia wants to cozy up to China and the Power of Siberia gas pipeline is not an alternative to Europe,” Deputy Director of the Russian Institute of the CIS Countries, Vladimir Yevseyev, told Caspian News.

Yevseyev believes that with the construction of the Power of Siberia, Russia is developing new gas deposits that cannot be used to export gas to Europe.

“You can notice that the volume of Gazprom's supplies to Europe has increased. Europe cannot buy less Russian gas because it has no alternative,” he added.

Some analysts say that Russia may seek to fill the gap in natural gas supplies abroad that may come as a result of Europe’s efforts to ditch Russian gas with alternative suppliers, such as the Caspian gas that will be piped in via the Southern Gas Corridor.

However, Yevseyev believes that the volume of Russian gas that is being exported to Europe cannot be fully replenished via other sources, whose export capacity will not be able to meet Europe’s growing demand.

Gazprom, which accounts for 11 percent of the global gas output and exports its gas to more than 30 countries, is actively implementing large-scale gas development projects in the Yamal Peninsula, the Arctic shelf, Eastern Siberia and the Russian Far East, as well as a number of hydrocarbon explorations and production projects abroad.

“We expect to occupy 13 percent of the Chinese gas market by 2035," a senior Gazprom manager Kirill Polous told investors in New York on February 6, speaking of timely implementation of the pipeline.