Inaugurated on 2 December 2019 by President Vladimir Putin and by the Chinese president Xi Jinping The Power of Siberia (Force of Siberia) gas pipeline is a 4,000 km long gas pipeline that carries Russian gas from the huge Siberian fields of Kovyktinskoye and Chayandinskoye to Blagoveshchensk, the Russian city on the Amur River which marks the border between the Russian Federation and the People’s Republic of China.
This is the route that Russia has been working on for years to ’emancipate’ itself from European customers. Because it is true that Europe depends on Russian gas, but the opposite is equally valid.
In 2021 Power of Siberia exported 16.5 billion cubic meters of gas to China. By 2025, exports are expected to rise to 38 billion cubic meters per year. The contract between Gazprom and China National Petroleum Corporation has a duration of 30 years and the infrastructure is worth $ 400 billion.
Current gas exports to China via the Power of Siberia 1 pipeline are fed by gas fields in Eastern Siberia and the recently agreed Far Eastern route (via Sakhalin) is separated from the European gas network.
Power of Siberia 2
As happened for the Nord Stream with the twin pipeline (Nord Stream 2), also for the Sino-Russian gas pipeline, a mirror project was carried out, inaugurated at the beginning of February. On the occasion of the start of the Winter Olympics in China, Putin and Xi signed another agreement for a new gas pipeline (Power of Siberia 2) which will supply China with another 10 billion cubic meters of gas. The first flows should cross the pipeline in 2026. The agreement could guarantee Russia about 37.5 billion dollars in 25 years considering an average price of 150 dollars per 1,000 cubic meters of gas that is applied between the two countries.
When fully operational, according to some estimates, the sale of gas could guarantee Moscow around 100 billion euros. “Our oilmen have prepared excellent solutions for hydrocarbon supplies to China,” Putin said during his meeting with Xi Jinping a few days ago.
Why Russia looks to the East
Regardless of the situation that has arisen in Ukraine, Putin has been looking at East Asian markets for some time. The limited prospects for long-term growth in gas consumption in a Europe that has focused on decarbonisation, green sources and easing its energy dependence on Russia have prompted Moscow to consider export routes as alternatives to the EU, explains one. note from Natixis analysts.
Trade between China and Russia reached a record volume of 146.88 billion dollars in 2021, an annual increase of 35.8%, according to data published by Chinese customs. For 2024, the goal is to reach 200 billion.
Also last year, China accounted for around 18% of Russia’s total trade turnover. In contrast, the Russian share of Chinese trade turnover was just over 2%.
Europe is still Moscow’s largest customer
However today Europe still represents Russia’s largest customer for gas with 83% of total supplies. “While it might seem like a rosy prospect for Russia at present, when Power of Siberia 2 is operational (assuming the project is implemented), the global gas market will most likely be in a very different position,” Natixis analysts explain. The global gas market is expected to remain buoyant until 2024, but not beyond. In 2025, a large additional supply of LNG from a mega field in Qatar will be added globally. The huge quantities of Doha gas will inevitably loosen the world market, diminishing Moscow’s bargaining power.
Russia is the first gas exporter in the world
Russia continues to be the leading exporter of natural gas in the world, with over 247 billion cubic meters of gas exported (year 2018), 200 of which are directed towards European markets, including Italy, which is the third importer, after Germany and Turkey, with approximately 22 billion cubic meters. The export of natural resources, above all oil and gas, is a fundamental component of the Russian state budget. In the two-month period August-September 2019, the export of hydrocarbons amounted to 65.38% of the entire volume of exports of the Federation and in 2018 the entire sector represented over 40% of budget revenues.
China leaves coal and focuses on gas
China, on the other hand, represents the main expanding market for natural gas thanks to the progressive abandonment of coal in the country. The International Energy Agency (IEA) estimates that between 2018 and 2024 Beijing will account for about 40% of the entire global growth in natural gas consumption.