Gazprom to supply 38 billion cubic meters of Russian gas annually to China

Moscow, Russia,  21-5-2014 — /EuropaWire/ — Alexey Miller, Chairman of the Company’s Management Committee and Zhou Jiping, Chairman of China National Petroleum Corporation (CNPC) signed today a contract to supply pipeline gas from Russia to China via the eastern route. The parties signed the document in the presence of Russian President Vladimir Putin and Chinese President Xi Jinping in Shanghai.

The 30-year contract stipulates that 38 billion cubic meters of Russian gas will be annually supplied to China. The mutually beneficial contract contains such major provisions as the price formula linked to oil prices and the ‘take-or-pay’ clause.

“Russia and China have signed the biggest contract in the entire history of the USSR and Gazprom – over 1 trillion cubic meters of gas will be supplied during a whole contractual period. Russian gas will be sold at a brand new market with a huge potential.

The arrangement of Russian pipeline gas supplies is the biggest investment project on a global scale. USD 55 billion will be invested in the construction of production and transmission facilities in Russia. An extensive gas infrastructure network will be set up in Russia’s East, which will drive the local economy forward. Great impetus will be given to entire economic sectors, namely metallurgy, pipe and machine building.

Today we started the first page of a big book, a fascinating story of the Russian-Chinese cooperation in the gas industry, and many more essential chapters are yet to be written in it,” said Alexey Miller.

Background

The eastern route stipulates the delivery of 38 billion cubic meters of natural gas from Russia to China via the Power of Siberia gas trunkline (unified gas transmission system encompassing the Yakutia and Irkutsk gas production centers designed for supplying natural gas to Russia’s Far East and China). The bulk of pipes used in the construction will be domestically manufactured. Some 11,700 experts will be engaged within Phase 1 of the Power of Siberia project and some 3,000 employees will ensure the pipeline’s operation.

CNPC is China’s largest petroleum company wholly-owned by the state and is one of the world’s leading integrated oil and gas production companies.

In 2009 Gazprom and CNPC inked the Framework Agreement on the major terms and conditions of natural gas supply from Russia to China. The Agreement stipulates annual exports of up to 68 billion cubic meters of gas to the Chinese market. In 2010 the Extended Major Terms of natural gas supply from Russia to China were signed.

In September 2013 Gazprom and CNPC inked the Agreement on the major terms and conditions of pipeline gas supply from Russia to China via the eastern route.

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Developing gas resources and shaping gas transmission system in Eastern Russia

In foreground – Alexey Miller and Zhou Jiping, in background – Vladimir Putin and Xi Jinping. Photo by RIA Novosti