Daily Management Review

JV for Gas Generation, Underground Gas Storage in China Signed Between Gazprom And CNPC


06/26/2016




JV for Gas Generation, Underground Gas Storage in China Signed Between Gazprom And CNPC
Even while China’s worst economic slowdown in a quarter century batters demand, Gazprom PJSC, the world’s top natural gas exporter, will join hands for a new contract with the Asian nation as President Vladimir Putin travels to Beijing.

TASS reported that a a memorandum of understanding on cooperation on a joint venture for gas generation and underground gas storage in China was signed between Russia’s energy giant Gazprom and China National Petroleum Corporation (CNPC).

Gazprom CEO Alexei Miller and CNPC CEO Wang Yilin signed the deal in Beijing on Saturday and the Russian president as well as the Chinese premier both was present at the deal signing event.

Gazprom said in a statement that the prospects of cooperation in the sphere of creating underground reservoirs to store natural gas on China’s territory would be studied by both the sides.  

According to the deal, the collaborators would also carry out assessment of geological, technological and economic conditions of creating gas storage facilities in Daqing, Jiangsu and Baiju, an analyst said. The sides will study and define the most promising projects to build gas-fired power plants by the end of August.

"The Russian-Chinese dialogue in the gas sphere encompasses new directions. Our cooperation in the sphere of underground storage and power generation will contribute to further deepening cooperation between companies and significant improvement of environmental situation in China," Miller said.

A $400 billion contract on gas supplies to China along the eastern route in the next 30 years was signed May 2014 between CNPC, one of the world’s largest integrated energy companies and Gazprom. Supplies of 38 bln cubic meters of Russian gas annually was stipulated through the eastern route using the Power of Siberia pipeline.

A framework agreement on natural gas supplies from Russia to China through the western route in November 2014 between the two gas companies. With design capacity of 30 billion cubic meters a year to be reached within the next 6 years, natural gas supply via the pipeline is possible after 2020. An agreement on the main conditions for pipeline supplies of natural gas from Russia to China via the western route was finalized between Gazprom and CNPC in May 2015.

These contracts between the two huge gas companies are important for Russia as relations with the U.S. and the European Union soured over the conflict in Ukraine. For example, the 30-year agreement to supply West Siberian gas actually feeds Europe and the tensions with Europe has forced Russia to look for other clients for its gas reserves.

The deals would make China its largest export client.

According to an annual report from China National Petroleum Corp.’s Research Institute of Economics and Technology, China missed a target of 230 billion in gas consumption for 2015 as its consumption expanded 3.7 percent noting the slowest pace in a decade, to 191 billion cubic meters. According to the median estimate of six analysts in a Bloomberg survey conducted in May, the gas demand growth this year may accelerate to only about 6 percent.

Gazprom aims to supply to China 60 percent of its current exports to Europe. It aims to expand its pipeline supplies to China to 100 billion cubic meters of gas a year.

(Source: www.bloomberg.com) 






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