Energy
Tuesday, July 26th, 2022 5:48 pm EDT
BEIJING — China and Russia are in the final stages of building the first pipeline that can send gas from Siberia to Shanghai.
“Power of Siberia” — as the portion located in Russia is called — began delivering natural gas to northern China in December 2019, according to Chinese state media.
In China, the pipeline runs down the eastern side of the country, past the capital city of Beijing and down to Shanghai. The middle phase started operations in December 2020, and the final southern section is set to begin gas deliveries in 2025, state media said.
State-owned energy companies, Russia’s Gazprom and China National Petroleum Corp., have been building the pipeline for about eight years.
The China-Russia pipeline comes as Moscow faces the threat of losing natural gas purchases from the European Union, a big customer that aims to cut two-thirds of its Russian gas imports in the wake of the Ukraine war.
China has been looking to diversify its energy sources. Beijing has refused to condemn Moscow for its unprovoked invasion of Ukraine in late February.
The scale of the China-Russia gas pipeline indicates it is just one of many energy options for Beijing.
Although Russia has reportedly invested $55 billion into its pipeline deal with China, natural gas imports through the pipeline have only totaled $3.81 billion since December 2019, according to China customs data as of June, accessed through Wind Information.
The pace of Chinese purchases picked up in the first half of this year — nearly tripling from a year ago to $1.66 billion, the data showed.
But China’s gas imports from Turkmenistan during that time were far higher at $4.52 billion, up 52% from a year ago, the data showed.
Natural gas remains a tiny fraction of China’s energy imports, which are mostly of crude oil.
By volume, Gazprom’s gas exports to China via the pipeline rose by 63.4% to 7.5 billion cubic meters during the first half of the year, according to Russian news agency Interfax. The original deal aimed for 38 billion cubic meters in annual deliveries in the coming decades.
The Interfax report said Gazprom’s overall exports to countries not formerly part of the Soviet Union fell 31% to 68.9 billion cubic meters in the first six months of the year.
In early February, China and Russia expanded their annual gas purchase agreement by 10 billion cubic meters — they did not specify when that would occur but said it was a “long-term agreement.” Reuters estimated additional sales worth $37.5 billion over 25 years.
The two countries have discussed building additional gas pipelines, including one expected to run from Siberia through the country of Mongolia. The Financial Times reported this month that Mongolia expects the new gas pipeline, known as the “Power of Siberia 2,” to begin construction within two years.
Nuclear power and coal
Both China and Russia are also collaborating on nuclear power development.
In May 2021, Chinese President Xi Jinping and Russian President Vladimir Putin spoke virtually at a groundbreaking event for joint construction projects at two nuclear power plants in China.
Much of China’s energy still comes from coal, the bulk of which is produced at home.
But in recent months China has been buying more Russian coal, which is being sold at a discount as many other countries plan sanctions on the commodity.
— CNBC’s Bryn Bache contributed to this report.
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