Gazprom accelerates gas pipelines to China

Russia is accelerating its natural gas exports to China through the Power of Siberia pipeline, aiming to reach full capacity by the end of 2024, a full year ahead of schedule. Gazprom, Russia’s state energy giant, agreed with China National Petroleum Corporation (CNPC) to increase supplies in December, reaching the pipeline’s projected capacity of 38 billion cubic meters (bcm) annually.

This increase in gas flows reflects Russia’s pivot to China as Moscow seeks to replace European buyers lost to its invasion of Ukraine. Gazprom has already stepped up supplies, delivering 20.8 billion cubic meters in the first eight months of 2024, according to Bloomberg calculations, coming close to last year’s total of 22.7 billion cubic meters.

In addition to the Power of Siberia pipeline, Russia is developing a second pipeline from the Far East, which is expected to add 10 billion cubic meters per year by 2027. However, negotiations for the proposed Power of Siberia 2, which could push total exports of Russian gas to China. at nearly 100 billion cubic meters annually, have stagnated due to price disagreements. A recent decision by the government of Mongolia not to include financing for the construction of the Power of Siberia 2 pipeline in its five-year economic plan was widely understood to mean that China is rethinking the pipeline project.

While China has become Russia’s main energy customer, Beijing is reassessing its dependence on Russian gas. Geopolitical concerns, the risk of over-reliance and China’s interest in diversifying its energy sources are driving this reconsideration.

Despite this, Russia remains keen to increase its pipeline exports to China as European markets continue to shrink under sanctions and investment in alternative energy. The ongoing discussions and developments signal a significant shift in Russia’s energy strategy, with China playing a central role in its future plans.

By Julianne Geiger for Oilprice.com

More top reads from Oilprice.com