China and Russia to turn on gas pipeline tap as neighbours forge stronger energy ties

Simone McCarthy

Natural gas is set to begin flowing from Siberia into northeastern China early next month, opening up a new supply route between Russia and its energy-hungry neighbour.

The project, a joint agreement between state energy giants China National Petroleum Corporation and Russia’s Gazprom, is part of efforts to bolster economic and diplomatic ties between the two countries, relations that have strengthened over the five years since the project was launched.

In Moscow on Monday, Chinese vice foreign minister Le Yucheng called the project a “major achievement”, marking both the 70th anniversary of diplomatic ties between the two countries and the “entry into a new era of China-Russia comprehensive strategic cooperative partnership”.

Energy collaboration has emerged as a key area in that partnership, matching Russia’s status as a global energy producer with China’s position as the world’s biggest importer and consumer of energy.

The pipeline stretches from Siberian gas fields, crosses underneath the Amur River that runs between the countries, and down into northeast China.

From early next month, the system will pump 38 billion cubic metres (1.1 trillion cubic feet) of gas into China annually when it reaches full capacity, under a 30-year agreement that Gazprom said was the biggest contract in its history.

Those levels are a fraction of the 276.6 billion cubic metres (9.8 trillion cubic feet) of natural gas that China consumed in 2018, about 45 per cent of which was imported, according to official Chinese data.

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In addition to marine imports via tankers, China also imports gas from central Asia through the Central Asia-China gas pipeline, which accounted for around two-fifths of the inflow last year, according to Bloomberg.

But the additional flows from Russia will be an important strategic source for China, especially as Beijing steers away from the air-polluting coal widely used in northern industries towards cleaner alternatives and looks to incorporate more gas into its energy mix, according to Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University.

“It’s a very positive development for China,” Lin said, noting that as demand increases energy security will require diverse sources for natural gas imports, as well as the development of China’s domestic production.

“For one … even though the actual quantity is not that big, it adds to security: and, second, it ensures that the northeast part of China has sufficient gas supply; and three, it makes it easier to talk to Russia again for future expansion.

“Russia will be considered a very important partner for energy moving forward – they have the resources and China has the market, so if these two countries can work together then they are complementary in terms of energy.”

Russia and China are in talks for a second natural gas pipeline from Siberia.

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The completion of the project and the turning on of the gas taps add a “symbolic” milestone to the countries’ energy cooperation, according to Zhang Xin, associate professor at the school of advanced international and area studies at East China Normal University.

“This is the most significant sign of collaboration: if both states want to show how much their partnership has made progress, this is the most visible, significant example,” he said.

“Energy is a significant part of the [two countries’] increasing bilateral trade, we do see some bumps in other areas of bilateral collaboration, but energy is the smoothest part of the economic collaboration,” Zhang said. Collaboration was more complicated, he noted, in areas such as finance.

Zhang said that recent energy deals were showing more diverse kinds of cooperation, with collaboration along the production chain and the use of different financing structures like joint shareholding.

This creates potential to advance other areas of the strategic partnership, he said, such as using their domestic currencies instead of US dollars for energy trade.

“As energy collaboration becomes more and more significant, both sides can actually build on that to potentially expand into related spheres of collaboration,” Zhang said.

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