Partnership between Russia and China in the sphere of natural gas steps up to an completely new level. First volumes of Russian pipeline gas will be delivered to China in 2019.

Projected natural gas consumption in the PRC is estimated by market participants at the level of over 300 bcm a year by 2020, and at a level around 500 bcm a year by 2030.

The main partner of Gazprom on the Chinese market is China National Petroleum Corporation (CNPC) — the largest state-owned oil and gas company in China and one of the leading integrated oil and gas production companies in the world.

On May 21, 2014, Gazprom and CNPC signed the Purchase and Sale Agreement to supply Russian gas via the Eastern route. It is the biggest purchase and sale contract in the history of the global gas industry. The 30-years’ agreement implies delivering 38 bcm of natural gas annually to the PRC from Yakutia and Irkutsk gas production centers via the Power of Siberia gas trunkline.

On October 13, 2014, in Moscow the parties signed a Technical Agreement — a supplement to the Purchase and Sale Agreement. This document defines basic parameters of design, construction and operation of the Power of Siberia gas trunkline’s cross-border section. In addition, the document contains the main technical and technological features of gas transfer from seller to buyer.

In May 2015, Chairman of the Gazprom Management Committee Alexey Miller and CNPC Vice President Wang Dongjin signed a Common Terms Agreement determining the main technical and commercial parameters of supply along the prospective Power of Siberia 2 pipeline. Gazprom and CNPC are continuing to discuss the terms of the sale-purchase agreement.

In 2015, Gazprom and CNPC also signed a Memorandum of Understanding on a project envisioning pipeline supplies of natural gas to China originating in the Russian Far East. In December 2017, proceeding from the agreemnets reached earlier, PJSC Gazprom and CNPC signed an Agreement on the basic conditions for the supply of natural gas from the Russian Far East to the PRC.

In September 2016, Gazprom and CNPC signed an EPC contract for the construction of an underwater crossing for the cross-border section of the Power of Siberia pipeline under the Amur River. In April 2017, a temporary two-way checkpoint was built on the state border as part of the project, in order to provide unfettered access to the restricted area for operating personnel and construction equipment. The checkpoint opened on May 11, 2017.

On July 4, 2017, Gazprom and CNPC signed a Supplementary Agreement to the Sales and Purchase Agreement for Russian gas supplies via the eastern route, defining the starting date for the deliveries. According to this document, gas supplies to China via the Power of Siberia gas trunkline will begin in December 2019. By December 2017, the work on harmonization of specialized technical agreements was completed, determining the order of interaction between the parties during the pre-commissioning, as well as in the organization of supply of natural gas under the contract.

The Russian and Chinese sides are also continuing talks on studying the prospects for cooperation with respect to building generating capacities in China, as well as UGS, for the purposes of supporting an increase in supplies of Russian “blue fuel”. In 2016, Gazprom and CNPC signed a Memorandum of Understanding in the area of underground gas storage and gas-powered electricity. In February 2017 Agreement was inked between Gazprom and CNPC to conduct geotechnical surveys for the creation of UGS facilities. In May 2017, three contracts were signed at the Belt and Road Forum in Beijing to conduct pre-development surveys for the purposes of creating underground gas storage facilities in China’s Heilongjiang and Jiangsu provinces.

On May 15, 2017, Gazprom, CNPC, and China Huaneng Group signed a Memorandum of Understanding to pursue joint efforts in the power sector within China.

Also, parties jointly promote the use of natural gas as a motor fuel. In May 2017, Gazprom, CNPC, Russian Highways, and China Communications Construction Company Ltd. inked a Memorandum of Cooperation aimed at developing road infrastructure and promoting the use of liquefied natural gas as a vehicle fuel along the Europe — Western China international transport corridor route. On October 5, 2017, Gazprom, CNPC, and KazMunayGas signed Memorandum of Understanding on long-term strategic cooperation in the NGV market, in partivcular developing the natural gas filling infrastructure at the Europe — China international transport corridor.

Related sections:
Power of Siberia, New Markets