Tariq Saeedi
Ashgabat, 22 May 2014 (nCa) —China and Russia signed Wednesday (21 May) a contract that envisages the sale of 1.14 trillion cubic meters of natural gas by Gazprom to CNPC over a period of 30 years.
The approximate value of the deal is said to be about US $ 400 billion.
Starting 2018, Gazprom will pipe 38 billion cubic meters (bcm) of gas annually to China for a period of 30 years.
The gas will be supplied from the Yakutsk and Irkutsk fields of Russian Siberia.
The contract was signed in Shanghai by Alexi Miller, the chairman of Gazprom, and Zhou Jiping, the president of CNPC, in the presence of the presidents of China and Russia.
Russia currently supplies about 160-170 bcm of gas to Europe annually. The China deal represents nearly 24% increase in non-CIS export volumes of Gazprom.
The timing is perfect. In the backdrop of the Ukraine predicament, Europe is scrambling to find alternative sources of supply to punish Russia. The agreement with China gives Russia a much needed safety net in case Europe finds a way to decrease its dependence on the Russian gas.
By all means, this is a historic breakthrough. In 2009, CNPC and Gazprom signed framework agreement on basic conditions for supply of gas, with proposed annual volumes of 68 bcm. In 2010, the advanced basic conditions for supply of gas were agreed. In September 2013, CNPC and Gazprom signed agreement on basic conditions of gas pipeline from Russia to China.
After ten years of hard negotiations and six years of signing the first document, this is the time to celebrate.
However, a press release by Gazprom issued 21 May seems to go off the tangent. The rightful jubilation gets buried under thick and rather crude bragging; creating a sense of bruised magnanimity and violated dignity.
Here are some passages from the press release:
“Russia and China have signed the largest contract for the supply of gas in the history of Russia and Gazprom.
“We have opened for the Russian gas a fundamentally new market with huge potential.”
The press release quotes Alexi Miller, the chairman of Gazprom: “Today we have opened the first page of a thick volume of the fascinating history of the Russian-Chinese cooperation in the gas sector, in which we have a lot of important chapters to scribe.”
| Comparison – Turkmen and Russian gas deals with China | ||
| Turkmenistan | Russia | |
| Annual volumes | 65 bcm | 38 bcm |
| Total volumes (30 years) | 1.95 trillion cubic meters | 1.14 trillion cubic meters |
| Total value of contract | US $ 685 billion* | US $ 400 billion |
*The exact price of Turkmen gas for China is now known. The figure mentioned here is based on the assumption that China will not be paying vastly different prices for the Turkmen and Russian gas
As we have seen in this table, the contracted volumes from Turkmenistan are 71% higher than Russia.
Gazprom has all the rights to trumpet this deal but the perspective in its press release was rather misaligned.
It would have been so much better if the stress was on energy security and all that it means for regional stability, prosperity and peace.