China and Russia have begun implementing their $400 billion mega-gas deal — a strategic project that would allow Moscow to lower its dependence on the European market, and open prospects of tapping the growing energy demand in the Asia-Pacific, with Beijing as the star consumer.
Russia’s eastward shift is anchored by the agreement to supply China 38 billion cubic meters of gas every year for 30 years. Gas flows will commence in 2018 after the lengthy Siberia Power Pipeline, having both Russian and Chinese components, gets completed.
On Thursday, the Chinese side froze the design and construction plan on its side for the pipeline, which will start in northeast China’s Heilongjiang province and terminate in Shanghai, China’s premier commercial and industrial hub. Construction is expected to start next year, covering three main segments before the pipeline terminates in Shanghai three years later.
Work on Russian segment of the pipeline, linking Siberia’s Kovyktin and Chayandin gas fields with the eastern port city of Vladivostok — a distance of 4,000 km — commenced last month.
Russian President Vladimir Putin has underscored the importance of the project by pointing out that Moscow and Beijing were now “launching a large-scale strategic project on the global level”. Underscoring the energy deal’s larger geopolitical fall-out, he said that the “new gas pipeline will significantly strengthen [Russia’s] economic cooperation with the governments of the Asia-Pacific region and, first and foremost, with our key partner China”.
The Russians are planning to invest $55 billion in building infrastructure and further exploring Siberia’s energy resources, to consolidate their outreach to Asia via China.
As Moscow prepares to receive Chinese Prime Minister, Li Keqiang, who has already commenced his official visit to Europe, Russian Prime Minister Dmitry Medvedev has announced that the Russian energy giant Gazprom, and the China National Petroleum Company (CNPC) — the two lead players in the project — will receive “comprehensive assistance” from the two governments.
The two countries are already upscaling their energy ambitions by negotiating additional supplies, which could double proposed energy flows from Siberia along an additional western route. In a media briefing ahead of Mr. Li’s visit, Chinese Vice-Foreign Minister, Cheng Guoping, acknowledged that the energy departments from the two countries “are busy with negotiations on the construction of the West Route gas pipeline”.
Alexey Miller, the Chairman of Gazprom, has been quoted as saying that Russia plans to sign a 30-year gas supply contract with China via the western route. He pointed out that a contract for an annual supply for 30 billion cubic meters is being planned, but talks have also looked at “supplying 60 billion cubic meters or up to 100 billion cubic meters of gas to China”.
