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China, Russia mull new gas pipeline
PIPELINES & TRANSPORT
CHINA and Russia appear to have revived talks on an on-again, off-again plan to run a natural gas pipeline through Mongolia.
Officials from Russia’s state gas supplier Gaz- prom and its Chinese counterpart CNPC met for talks in Beijing earlier this month. And on September 9, Russian President Vladimir Putin held a briefing with Gazprom CEO Alexei Miller, ordering him to consider the transport of gas through Mongolia.
“Please, look into the resources of [the] Yamal [Peninsula] as well, in order to gather the nec- essary resources for the supplies via the west- ern route to China via Mongolia,” he told the company chief, adding that Russia’s partners in China also “lean toward” developing a Mongo- lian gas route.
Russia, the world’s biggest gas producer, is set to carve out a share of the growing Chinese gas market with the launch of piped supplies this December. This milestone will be possible thanks to the completion of Power of Siberia, a 3,000-km pipeline capable of pumping up to 38bn cubic metres per year of Siberian gas to China’s densely populated east.
Moscow and Beijing have been debating the construction of a second cross-border pipeline for years, but as yet, no binding agreements have been made. Several options have been floated, including pipes entering China from Vladiv- ostok in the Far East and the Altai region next to Kazakhstan.
Building a gas pipeline between two coun- tries is rarely an easy undertaking, requiring both strong political will and a firm commer- cial rationale. In China and Russia’s case, price has traditionally been a sticking point in talks. Gazprom and CNPC held discussions on a large- scale supply deal for Power of Siberia for a dec- ade before reaching a $400bn sales and purchase agreement (SPA) in 2014. As such, it is likely to be some time before Beijing and Moscow com- mit to a second pipeline’s construction. Russia’s preference is a route through Altai, which would
help reduce investment costs, as Gazprom would be able to pump gas from already-developed fields in Western Siberia. However, a Mongolian route may be more convenient to China, as VTB Capital argued in a research note on Septem- ber 10. Whereas the Altai pipeline would enter China in its sparsely populated Xinjiang Prov- ince in the north-west, a Mongolian pipeline would arrive in its industrialised east. The latter’s route to Beijing is also shorter, at only 4,800 km compared with 5,700 km for the Altai option, the bank noted.
The project would also bring considerable benefits to Mongolia. Besides receiving lucrative revenues for transiting Russian gas, Mongolia would also be able to use some of these supplies to generate electricity, provided it invested in new power generation facilities. This would help the Central Asian country wean itself off coal and tackle pollution in its larger cities.
“Overall, we believe that this is a compli- cated project to negotiate with China, espe- cially given the low gas prices globally due to theabundanceofgasandLNGsupplies,”VTB Capital said. “We do not expect any material progress in the near term.”
Pipeline negotiations are hard enough with only two countries taking part, let alone when they involve a third, transit country as well. And Gazprom might do better to focus on expanding its LNG business instead, enabling it to capture more market share globally rather than in a sin- gle country. The state company has fallen behind its domestic competitor Novatek in this area. Novatek is developing a hub for LNG exports in the Arctic, with plans to produce as much as 70mn tonnes per year (tpy) of the super-chilled gas by 2030.
What is more, Russia is not the only gas sup- plier vying for the Chinese market, with Kazakh- stan, Turkmenistan and Uzbekistan all hoping to ramp up pipeline shipments as well. The market is also contested by leading LNG exporters Aus- tralia, Qatar and the US.™
NPCC to work with Chinese services firms
PROJECTS & COMPANIES
THE UAE’s National Petroleum Construction Co. (NPCC) has agreed deals to explore collab- orative opportunities on- and offshore with two Chinese services firms.
Announced during the first day of the World Energy Congress in Abu Dhabi, the agreements were signed with China National Petroleum Corp. (CNPC) subsidiary China Petroleum Engineer- ing & Construction Corp. (CPECC) and China National Chemical Engineering Co. (CNCEC).
Under the deal with CPECC, NPCC will pur- sue opportunities for the pair to collaborate on projects to create value for both companies and exchange information, data and insights, accord- ing to the UAE’s WAM news agency.
The memorandum of understanding (MoU) agreed with CNCEC will see the parties co-oper- ate on potential projects for Abu Dhabi National Oil Co. (ADNOC) as well as seek opportunities for financing services on ADNOC projects in
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