Gazprom signs China supply deal

 

Russian and Chinese state energy giants Gazprom and China National Petroleum Corporation have signed a large-scale gas supply agreement after years of talks.

Russian president Vladimir Putin and Chinese president Xi Jinping led the signing ceremony in Shanghai on Wednesday.

The energy ministers of both countries as well as chief executives Alexei Miller and Zhou Jiping also attended the signing, CNPC confirmed in a statement.

The deal is for Russia to supply China with 38 billion cubic metres of gas per year beginning in 2018.

The gas is to be piped from the Power of Siberia pipeline that currently runs to the Russia/China border but is planned to continue to China's north-east region.

Miller earlier told the Russian news service RT that the overall value of the deal was more than $400 billion but that the unit price of the gas was a “commercial secret”.

The deal had originally been expected to be concluded during Putin's visit before negotiations foundered over price and some overnight reports even suggested the signing was off for now, hitting Gazprom shares in Moscow in early trading.

Putin’s spokesman Dmitry Peskov insisted talks were ongoing and a deal could "happen absolutely any moment".

Many observers suggested the last-minute impasse implied that China was driving a hard bargain on price.

Putin also pledged to invest $55 billion in gas exploration and pipeline construction to China, while China will give $20 billion to Russia as part of the deal, Reuters said.

Russia has been seeking to diversify its gas supplies to energy-hungry Asian markets as demand in Europe has been hit both by economic recession and the political stand-off over Ukraine, with European countries now looking to cut their reliance on Russian gas.

At the same time, China’s gas consumption is forecast to more than double by the end of the decade as China’s economy swells and Beijing seeks to switch from coal to cleaner fuels in its power-generation sector.

Chinese state media had quoted Putin as saying at the weekend that preparations for the gas supply agreement - some ten years in the making - had entered “the final phase”, while Gazprom said it was “only one digit” away from a deal.

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