Business / Industries

Gas deal with Russia offers longer-term security

By Du Juan (China Daily) Updated: 2014-05-23 07:02

Pact will give China a stable energy source and a stronger hand in talks with other suppliers, reports Du Juan

Gas deal with Russia offers longer-term security

China has signed a series of energy deals with Russia that will ensure secure supplies for the world's second-largest economy.

"This is a historic moment for these two giant economies, which have formed an alliance for energy cooperation that can maintain a regional balance and avoid intervention from the United States in Asia," said Han Xiaoping, chief information officer of China Energy Net Consulting Ltd.

Gas deal with Russia offers longer-term security

Gas deal with Russia offers longer-term security

During Russian President Vladimir Putin's two-day visit to Shanghai, Chinese and Russian officials announced a comprehensive energy partnership that will deepen cooperation in oil, natural gas, coal, utilities and infrastructure construction.

Bilateral agreements were signed that are meant to ensure China has a diversified supply of energy and Russia gets more capital for its domestic development.

On Wednesday, State-owned China National Petroleum Corp and Russian's top gas exporter Gazprom OAO signed a 30-year natural gas supply contract valued at $400 billion. The deal has been in the works for about two decades.

Gazprom will supply China with 38 billion cubic meters of gas annually starting in 2018 via the eastern gas pipeline.

The price wasn't officially announced, but Reuters quoted sources saying it is about $350 to $380 per 1,000 cubic meters.

Han said the price lies between the cost of China's gas imports from Central Asia and Russia's export price to Europe.

"The price will become more acceptable in the future as the yuan grows stronger, assuming the deal runs smoothly for 30 years," he said.

More important, the price will help China in future negotiations with other gas suppliers, including liquefied natural gas producers, according to Han.

"China's imported LNG price is higher than the deal price with Russia," he said.

The price agreed to with Russia "will give China more clout in bargaining with other suppliers in the future", he said.

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