MOSCOW, March 25 Reaching an agreement on the Power of Siberia 2 gas pipeline project may be delayed due to Chinese expectations of attractive prices for Russian gas follows from the comments of the interviewed experts.
Russia and China have agreed on «virtually all the parameters of an agreement» on the Power of Siberia 2 project, President Vladimir Putin said Tuesday during extended talks between Russian and Chinese delegations. Companies were instructed to work out the details of the project in order to «ensure the agreement on conditions», Russia hopes that Gazprom and the Chinese CNPC will sign a contract by the end of 2023, Deputy Prime Minister Alexander Novak later noted.
The companies determined the technical and commercial parameters of deliveries along the «western» route back in 2015. Then Gazprom and CNPC signed a corresponding agreement. The gas giant began pre-investment work on the project in 2020, but an agreement has not yet been reached. It is assumed that the route of the highway will pass through the territory of Mongolia.
Russia's share in imported gas supplies to China in the event that Power of Siberia reaches its full capacity (38 billion cubic meters per year), supplies begin via the Far East route (10 billion cubic meters per year) and the Power of Siberia 2 (50 billion cubic meters per year) can reach 30% over the horizon of 10-15 years, and with LNG — and more, says Alexander Amiragyan, head of the Economics of Fuel and Energy Complex department of the Center for Strategic Research. Although Chinese companies are interested in gas supplies under long-term contracts, increased dependence on one supplier may cause some concern, he said.
«However, given the high prices for LNG on the world market, the possibility of contracting gas supplies through the Power of Siberia 2 on favorable terms for the Chinese side may outweigh the possible costs of increasing dependence on one supplier,» Amiragyan said.
The price benchmark for the Chinese side for Power of Siberia 2 is the cost of Russian gas supplied through Power of Siberia, says Maria Belova, research director at Vygon Consulting. According to the results of the first half of 2022, it was the lowest among all sources of China's gas imports — $ 230 per thousand cubic meters, she clarifies.
«And taking into account the fact that the resource base for this gas pipeline system can be operating fields that previously supplied Europe, and the route involves a transit component, China can expect a discount,» Belova believes.