Gazprom Siberia pipe plans to boost China-Europe gas competition

5/23/2014

Gazprom Siberia pipe plans to boost China-Europe gas competition

ELENA MAZNEVA and ANNA SHIRYAEVSKAYA

ST. PETERSBURG, Moscow (Bloomberg) -- OAO Gazprom plans to unify its west- and east-bound pipelines, which will increase competition between Europe and China for Russian fuel.

The Moscow-based company plans “in the nearest future” to build a link that will unify pipelines running to Europe and China, Gazprom CEO Alexey Miller said today, May 23, in St. Petersburg. The $400-billion deal announced this week to supply China National Petroleum Corp. with 38 Bcm of gas annually for 30 years marks the start of competition between Europe and Asia for Russian gas, he said.

“There are no $400 billion contracts lying around on the road to Europe,” Miller said on a panel at the St. Petersburg International Economic Forum.

Gazprom meets about 30% of European demand and the agreement with China after a decade of talks is its first for pipeline gas into Asia. While Russian gas exports to Europe are rising, the country’s relations with the European Union have soured as Ukrainian tensions escalated and Gazprom is under antitrust investigation by the European Commission over pricing and trade.

Gazprom will supply China via pipelines yet to be built from 2019, the company said today. Chinese demand for the fuel will double by 2018, according to the International Energy Agency, an adviser to 29 nations.

Russia will unite west and east Siberian gas networks, President Vladimir Putin said in St. Petersburg. Europe is supplied by Gazprom’s fields in western Siberia, including the giant Bovanenkovo field, while most eastern Siberian gas fields aren’t producing as negotiations with China dragged on.

The Kovykta and Chayanda gas fields in eastern Siberia, the main deposits in the region, have reserves of 3 Tcm, Putin said today. That’s enough to supply the world for almost a year, according to BP Plc’s Statistical Review of World Energy.

Gazprom’s average price in Europe, its main market, was $380.50 per thousand cubic meters ($10.65 per million Btu) last year. The price in the CNPC contract is more than $350, Deputy CEO Alexander Medvedev, head of the Moscow-based company’s export unit, said today in St. Petersburg International Economic Forum.

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