Russia pivots East with launch of natural gas deliveries to China

In a move to cement energy cooperation with the fast-growing economies in Asia, Russia officially launched delivery of natural gas supplies to China, via the Power of Siberia pipeline, on Monday.

Russian President Vladimir Putin and China's Xi Jinping gave the green light at an official ceremony via teleconference.

Russia, the world’s biggest gas exporter, is looking to one of the globe’s top consumers, China, as Moscow’s relations with the West deteriorate. The move gives Russia an enormous new market outside of Europe which has targeted Moscow with sanctions, over the conflict in Ukraine, since 2014.

The mega pipeline was built in record time. Initially, the launch was planned for December 20 but the construction was completed ahead of schedule.

The 3,000km-long (1864 miles) pipeline will ship gas from Russia’s huge gas reserves in its eastern regions to the Chinese border. It will then link up with China’s own network to deliver gas as far as the eastern seaboard and help satisfy the nation’s vast and growing energy needs.

“The tap is open, gas is being supplied to the gas transportation system” of China, CEO of Gazprom Alexey Miller told President Putin via a videolink from the compression station near the Chinese border.

The so-called eastern route’s capacity is 61 billion cubic meters of gas per year, including 38 billion cubic meters for export.“This move is bringing Russian-Chinese strategic cooperation in energy to a whole new level,” Putin said to Xi via videolink. The Chinese president called it “a milestone project for bilateral energy cooperation.”

Russian energy major Gazprom and China National Petroleum Corporation (CNPC) sealed a historic $400 billion contract for gas supplies via the Power of Siberia gas pipeline in 2014, after more than a decade of talks. It is Gazprom’s biggest contract ever and the first natural gas pipeline between China and Russia.

Gazprom plans to start with deliveries of 10 million cubic meters a day and aims to reach peak capacity by 2025. Minimum exports to China via the pipeline will be 5 billion cubic meters in 2020, 10 billion in 2021 and 15 billion in 2022, according to the Russian company.

Gas consumption in China, Asia’s biggest economy, has surged in recent years as the government pressures homes and factories to use it instead of coal to combat air pollution. Imports reached 43 percent of the total gas supply in 2018, with about two-fifths of that arriving via pipelines from Central Asia and Myanmar, with the rest sourced as LNG.

Gazprom intends to become China’s biggest supplier, making up for more than 25 percent of gas imports by 2035 as demand for natural gas grows. China is the world’s largest importer of oil and second-biggest buyer of natural gas.

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