Page 5 - AsianOil Week 12 2023

AsianOil COMMENTARY AsianOil

Turkmenistan by developing the long-planned China could also consider expanded LNG
30 bcm per year Line D pipeline, or sign more imports from multiple suppliers as a better
LNG import agreements and expand its regas- option than expanded pipeline volumes from
ification capacity. Russia. Extra LNG imports can be secured
In other words, Beijing’s bargaining position incrementally, based on the evolving mar-
is much stronger. This affects not only pricing ket outlook, and in cases where Chinese gas
but also negotiations over how Power of Siberia demand underperforms, they can be rerouted
2’s construction is financed. Moscow has tried to to other markets, as happened last year when
get Chinese banks to provide loans for building Chinese gas consumption slumped as a result of
Power of Siberia 1 but failed, and this is likely to COVID-19 restrictions. Power of Siberia 2 does
be the case this time around as well. not offer such flexibility, given that Russia will
If we assume China does not wholeheartedly likely require a take-or-pay clause in the supply
finance Power of Siberia 2, Russia will have a contract to ensure a return on investments.
difficult job finding the necessary funding itself. Russia’s weaponisation of gas supplies to
Russian banks had to cover most of Power of Europe will also not have gone unnoticed by
Siberia 1’s cost, and the now much weaker state policymakers in Beijing, and they will consider
of the government’s finances and Russia’s general carefully the risk of depending too greatly on the
economic woes will make the task much harder country’s energy supplies.
for Power of Siberia 2. All told, Russia’s pursuit of extra gas sales to
Beijing may also want to put the project on China is rational, in the sense that it is the best
the hold for the time being, until it has a better option available for reviving its gas industry in
sense of how much gas it will need in the coming the wake of the loss of the European market. But
decades. Global economic and energy market the idea that Russia could be sending anywhere
volatility make forecasting difficult. A lot will close to 100 bcm per year of gas to China by the
also depend on how committed China is to turn of the next decade is very unrealistic. And
phasing out coal-fired power, and how quickly those sales are unlikely to offer the same returns
it deploys renewables. that Gazprom once enjoyed in Europe. ™

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