Gazprom: Supply talks with China unaffected by short-term demand drop

By ELENA MAZNEVA
Bloomberg

Russia’s energy pivot to Asia won’t be slowed by a slump in commodities and cooling economic growth in China, according to the state-run energy giant Gazprom PJSC.

The world’s largest natural gas exporter sees its supply negotiations with China unaffected by the Asian nation’s falling demand this year for imported fuel, Alexander Medvedev, Gazprom’s deputy head, said in an interview on Tuesday. China’s need for overseas gas is down about 15% from the previous year to 51 billion cubic meters, according to his presentation at an industry conference in Russia’s Far East.

"Our Chinese partners are looking well ahead" into the future, Medvedev said. "We share a philosophy of the gas business with our Chinese partners because it is based on a long-term approach."

China’s economy is growing at the slowest pace in a generation amid an oversupply of raw materials, which has punished commodity prices and producers and complicated Russia’s efforts to develop Asia as a center of demand for its energy exports.

China Deals

Russian President Vladimir Putin clinched the first contract to supply East Siberian gas to China last year in a $400 billion deal as relations with the US and the European Union soured over the conflict in Ukraine. Gazprom planned to follow that with another 30-year agreement to ship gas from West Siberian fields.

The second deal, initially planned to be finalized this year, will be completed by spring 2016 or “a little bit earlier,” Gazprom CEO Alexey Miller said in September during Putin’s visit to China. Instead of sealing an agreement, the state-run company signed a memorandum of understanding with China about a possible third gas pipeline from the Sakhalin region in Russia’s Far East.

Gazprom maintains its target of increasing annual deliveries to 100 billion cubic meters or more given the three possible routes, Medvedev said Tuesday, declining to comment on timing. The company sees total China demand for imported gas at 131 billion cubic meters in 2025, he said in the presentation, without specifying how much of that could be supplied by Russia.

China’s total natural gas demand will rise to almost 204 billion cubic meters by 2017, from about 185 billion this year, BMI Research, a London-based unit of Fitch Group, said in a report dated Sept. 28. China’s industrial sector accounts for about one-third of the country’s total natural gas demand, according to BMI.

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