Russia offers China new gas route as talks on West Siberian link stall

By ILYA ARKHIPOV and ELENA MAZNEVA
Bloomberg

Gazprom PJSC, the world’s biggest natural gas supplier, is preparing a deal with China to build a pipeline near the Pacific coast as talks about a West Siberian link drag.

The state-run Russian company plans to sign a memorandum of understanding about supplying gas to China through a pipeline from the country’s Far East during President Vladimir Putin’s visit to Beijing this week, Kremlin aide Yuri Ushakov told reporters in Moscow Monday.

The two-day visit is set to start Wednesday.

Last year, Putin reached his first $400 billion deal to supply gas to China from East Siberia, marking an energy pivot toward Asia as Russia’s relations with the US and the European Union soured. Gazprom planned to follow that accord with another 30-year contract to supply gas from West Siberia after about a decade of talks.

That deal is “unlikely” to be signed during the visit, Ushakov said.

While the company said last week that talks about the western project are on track, the Far Eastern link -- less ambitious and more interesting for China -- has a better chance, said Maxim Moshkov, an energy analyst at UBS Group in Moscow.

Gazprom’s biggest gas field in the Far East, Yuzhno-Kirinskoye, was targeted by the US under sanctions that limited supplies of technology and equipment.

The Moscow-based gas exporter planned to use fuel from the field to produce liquefied natural gas (LNG) in partnership with Royal Dutch Shell before the curbs were imposed.

Russia may have to offer China more than a lower gas price to clinch the new deal, such as a stake in the offshore field, UralSib Capital in Moscow said in an note last week.

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