- Gazprom increases gas supply to China via the existing pipeline.
- Memorandum signed for the Power of Siberia 2 pipeline construction.
- Gas prices to China are lower than European customer rates.
Gazprom of Russia has agreed to a slight increase in gas deliveries to China through an existing pipeline and has formalized a memorandum for constructing the extensive Power of Siberia 2 pipeline, albeit at rates lower than those for European customers, according to state news agencies.
The action occurs as Russia aims to strengthen its energy relations with China, its main trading partner, after experiencing a substantial loss of market share in Europe because of sanctions imposed after the 2022 Ukraine conflict.
Last month, Reuters indicated that China aimed to acquire additional Russian gas via an existing pipeline since negotiations between the nations had not advanced significantly regarding the construction of a new connection.
Alexei Miller, the chief executive of Gazprom, which is state-controlled in Russia, informed Russian news outlets on Tuesday that a deal had been established to raise volumes through the existing pipeline Power of Siberia, from Eastern Siberia to China, increasing it from 38 billion cubic meters (bcm) per year to 44 bcm.
Miller stated Russia and China have signed a deal to build another pipeline called Power of Siberia 2 that can transport 50 bcm of gas a year to China via Mongolia from the Bovanenkovo and Kharasavey gas fields in Yamal.
"Today, a legally binding memorandum was signed on the construction of the Power of Siberia 2 gas pipeline and the Soyuz Vostok transit gas pipeline through Mongolia," Miller said, Russian news agencies reported.
Miller stated that the cost of gas supplied to China is less than what Russia charges European customers because of the extensive distances and challenging terrain involved in constructing the pipelines. He also mentioned that Power of Siberia 2 would be the largest and most capital-intensive gas project globally. It remains uncertain who will construct the pipeline, and the ultimate investments have yet to be revealed.
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After the meeting between President Vladimir Putin, Chinese President Xi Jinping, and Mongolian President Ukhnaagiin Khurelsukh in Beijing, Miller said that the prices related to gas supplied via the Power of Siberia 2 would be negotiated separately, according to Russian news agencies.
China's state news agency Xinhua reported Tuesday that the two leaders had substantial discussions and signed over 20 bilateral agreements on cooperation in areas such as energy.
Since the West implemented severe sanctions on Russia in response to its conflict with Ukraine, the "no limits" partnership between China, the world's largest energy consumer, and Russia, the world's number one producer of natural resources, has grown even stronger.
According to the Kremlin, China has become Russia's largest trading partner, largest buyer of Russian crude oil and gas, second largest buyer of Russian coal, and third largest buyer of Russian LNG.