The Power of Siberia and China’s Next Natural Gas Moves
Gazprom’s Power of Siberia pipeline is more than two-thirds complete. It will be delivering gas to China by the end of this year. A second pipeline is still under discussion.
A report yesterday from Alex Mercouris at The Duran noted some frustration from Chinaover the irregular liquefied natural gas (LNG) supplies coming from its contract partners in Uzbekistan and Turkmenistan.
It seems the Turkemi and Uzbek governments are shaking down China for better prices because gas demand in Western China’s autonomous regions is growing rapidly. Complicating matters is the tough winter in Europe which spiked LNG demand there as well.
Remember, Gazprom recently announced that delivered volumes to Europe rose by 8% in 2017 over 2016. And that number is likely to rise again this year. Even the U.K. is begrudgingly buying Russian LNG from the Yamal LNG project on the Eastern Baltic coast.
China National Petroleum Corp., CNPC, just signed a deal with Cheniere Energy to supply 1.2 million tons of LNG annually. China’s demand for natural gas has to rise as its leadership deals with the increasing costs of air pollution from running a major portion of its economy on coal.
This is part of the reason why Russia and China hooked up for the original Power of Siberia pipeline in the first place. And it’s why I have little doubt that a second pipeline is a slam dunk. This would be the expanded Altai Pipeline or Power of Siberia 2 that was postponed in 2015 but is now back on the table.
Last year China and Russia signed an MOU on Power of Siberia 2. Though no formal agreement has been reached, it’s obvious both parties want this done. The question for China is likely price. And they are not above holding out for better terms and cheaper gas prices.
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