Russian player Gazprom has started up exports from its multi-billion-dollar Sila Sibiri pipeline, which will send Siberian gas into China.

This first phase of the pipeline runs for about 2200 kilometres from Gazprom's Chayanda gas and condensate field in East Siberia to the Russian-Chinese border near the city of Blagoveschensk.

Gazprom has reportedly spent about 367 billion rubles ($5.7 billion) on the pipeline project in the last two years, in addition to the investments made into the development of the Chayanda field.

Under a long-term contract with China National Petroleum Corporation, Gazprom is set to supply up to 38 billion cubic metres of gas to China via Sila Sibiri.

Gazprom said it expects to ship just 5 Bcm of gas to China via the pipeline in 2020, 10 Bcm in 2021 and 15 Bcm in 2022.

A further ramp-up in gas shipments to China is expected after 2023, when Gazprom is set to complete the second phase of the Sila Sibiri pipeline project and extend it by 800 kilometres from the Chayanda to the Kovykta field.

The Kovykta field holds recoverable reserves of about 2.7 trillion cubic metres of gas, while the Chayanda field is said to hold 1.2 trillion cubic metres of gas.

Total costs of the two phases Sila Sibiri and the development of the Chayanda and Kovykta fields are estimated to exceed $55 billion, with planned gas treatment facilities requiring additional investments of $14.8 billion.

These costs, together with a risk of lower hydrocarbon prices in China, continue to raise concerns among industry analysts that the project will take a long time before it pays off investments and breaks even.

However, Gazprom executives have repeatedly played down such concerns.

Before the end of the second quarter of 2020, Gazprom is set to begin operations of two other expensive projects — TurkStream to Turkey and Nord Stream 2 to Germany.

Field Development

Gazprom starts gas export pipeline Sila Sibiri