Russia-China Natural Gas Deal

It took nearly 10 years before Russia and China were able to finalize their accord which provides that the former will supply the latter with natural gas amounting to $400 billion.

Government-owned GAZPROM is intent in firming up this deal despite the fact crude oil has plunged nearly 40 percent in the last six months and weakened the bargaining power of the oil firm.

This has reduced available funds for a second pipeline from Russia to China.

According to a senior researcher from the Oxford Institute for Energy Studies, the Russian government can give priority to another pipeline which is cheaper and faster to construct. However, this could be less useful for the Chinese government which is fully aware that they have the leverage.

The two nations signed the covenant on the second 30-year gas concord which involves building a conduit from West Siberia. This can deliver a maximum of 30 billion cubic meters of gas annually. This is an addition to the 38 billion cubic meters indicated in the first agreement.

Meanwhile, Brent crude oil has went down to around $58 per barrel from $92 due to oversupply.

However, the head of the company’s export division said weak crude prices will not last eternally.

GAZPROM realizes the interest of Beijing in this project. Hence, the jointly satisfactory solutions for its execution will be accomplished.

China’s demand for gas is increasing. In fact, it needs to import no less than 150 billion cubic meters of gas yearly for the next 15 years even if the economy continues to become lethargic.