Page 5 - FSUOGM Week 01 2021

FSUOGM COMMENTARY FSUOGM

Germany will hold firm in its support, therefore, Central Asia-China gas pipeline, which delivers
cannot be assured. mainly Turkmen gas. This project, which would
provide China with an extra 30 bcm per year of
Pipeline aspirations gas, has been discussed for over a decade but has
One area where Gazprom’s production capacity made only limited progress. 2022 could be the
is rising is in Eastern Siberia, where the company year when concrete steps forward are made in
is ramping up supplies to China via the Power negotiations on the pipeline between Beijing and
of Siberia, launched at the end of 2019. At pres- its Central Asian partners.
ent, there is no connection between Gazprom’s There is a more distant prospect that India
fields in this area and the fields that deliver gas to and Pakistan might show greater interest in
Europe, but the company is hoping to establish the Turkmenistan-Afghanistan-Pakistan-India
such a link in the future. This raises the prospect (TAPI) pipeline in light of the energy crunch.
of Gazprom diverting gas that would otherwise Turkmenistan has been trying to advance the
go to Europe to China instead, where it is likely project for decades but has been unable to get
to fetch a higher price. the financing it needs, partly because of security
The energy crunch is not exclusive in Europe. risks in Afghanistan. Afghanistan is now under
Asian gas consumers are also struggling with the control of the Taliban, which have promised
insufficient supply, including China. Conditions to protect the pipeline. But the international
on the market could result in tangible progress isolationism that Taliban-controlled Kabul now
being made in talks for a second gas supply con- faces will not make financing the project any eas-
tract between Gazprom and CNPC that would ier. In any case, both India and Pakistan seem far
underpin the construction of a second pipeline. keener to expand their LNG imports rather than
This second pipe, known as Soyuz Vostok, commit to a costly and potentially risky pipeline
would run through Mongolia and would carry investment.
up to 50bn cubic metres per year of gas from
Gazprom’s fields on the Arctic Yamal Peninsula An end to OPEC+?
rather than deposits in Eastern Siberia. Gazprom Members of the OPEC+ producers’ alliance have
had previously banked on European demand so far signalled that they will end their produc-
supporting the development of these fields. tion quotas in April 2022 as originally planned.
It could still take considerable time for China But it is premature to make any assumptions.
and Russia to reach a binding sales contract for The emergence of new coronavirus (COVID-
Soyuz Vostok. The project was only announced 19) strains and continuing economic instability
two years and it took a lot longer for the two could push down prices, prompting the oil cartel
countries to reach a supply agreement to under- to rethink its policies.
pin Power of Siberia, which they finally did in OPEC+ could choose to extend its produc-
2014. tion cuts in the event of lower prices, much to
Surging gas demand in China and global the frustration of figures in Russia’s political
supply constraints could also prompt Beijing to elite that have opposed restrictions on output
look more seriously at adding a fourth line to the since the start. Despite such dissenting voices,

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