Page 4 - FSUOGM Week 22

FSUOGM COMMENTARY FSUOGM
Doubts raised about Gazprom’s eastern export plans
The investigation paints Russia’s ambitious Power of Siberia pipeline project as a costly misadventure rather than the geopolitical triumph it has been hailed as by Moscow
RUSSIA
WHAT:
An investigation by a Russian news outlet suggests Gazprom will not fulfil its commitments under a $400bn gas deal with China.
WHY:
The production potential of the Eastern Siberian fields due to provide
the gas has been overestimated, the agency claims.
WHAT NEXT:
Gazprom is drawing up plans for a second pipeline to China, suggesting its lavish spending habits will continue.
AN investigation by Russian news agency Lenta. ru has found that Gazprom will struggle to deliver on a landmark gas supply deal it reached with China six years ago. Its findings paint Rus- sia’s ambitious Power of Siberia pipeline project as a costly misadventure, rather than the geopo- litical triumph it is hailed as by Moscow.
After over a decade of negotiations, Gazprom agreed a landmark deal with Chinese counter- part CNPC in 2014 to deliver up to 38bn cubic metre per year of gas to China over a 30-year period. The contract’s terms were never dis- closed, but Russian officials claimed at the time that it was worth $400bn.
The agreement underpinned the construc- tion of Power of Siberia, a 3,000-km gas pipeline connecting gas fields in Eastern Siberia with the growing Chinese market. Power of Siberia was brought on stream in December last year in a ceremony led by Russian President Vladimir Putin and Chinese President Xi Jinping.
Power of Siberia is currently flowing gas from the Chayandinskoye field in Yakutia, which has a planned output plateau of 25 bcm per year – a target Gazprom expects to reach in 2022-2023. The company plans to commission a second field
in the neighbouring Irkutsk region, Kovyktin- skoye, by the end of 2022.
Gazprom said in April it was already drill- ing production wells at Kovyktinskoye, noting it planned to begin building a pipeline section linking the field with Chayandinskoye in the third quarter. Kovyktinskoye will also flow 25 bcm per year at peak capacity, according to Gazprom.
Power of Siberia is anticipated to reach its full capacity of 38 bcm per year by 2025, having delivered only 5 bcm of gas this year.
Overstated potential
However, Lenta.ru’s investigation, published on May 28 and based on international reports and audio tapes obtained from Gazprom employees and consultants, casts doubt on whether these production targets will be met.
Lenta.ru claims that Gazprom overestimated the output potential of both fields. Furthermore, its senior management kept information about technical setbacks quiet, the agency says, amid pressure from the government to fulfil the 2014 supply deal.
The estimate for Chayandinskoye’s
P4
w w w . N E W S B A S E . c o m Week 22 03•June•2020