Russia has entered into a long-term agreement to supply natural gas to China, strengthening its energy alliance with the communist country just as tensions between Europe continue to deteriorate.
State-owned Gazprom signed a 30-year contract with the China National Petroleum Corporation (CNPC) this week to supply 10 billion cubic meters of natural gas per year from the Russian Far East region. First flows to northeast China are slated to start within the next two to three years, after which capacity will reach a total of 48 billion cubic meters annually, with the inclusion of gas deliveries through the Power of Siberia pipeline.
Russia already has a strong relationship with neighbouring China, after signing its first 30-year contract via the 3,000km Power of Siberia cross-border pipeline back in 2014. Then, in 2015, the countries agreed on more deliveries through the Power of Siberia 2, which supplies an additional 50 billion cubic meters of natural gas per year from the Yamal Peninsula through Mongolia to China.
“The signing of the second contract for the supply of Russian gas to China testifies to the highest level of mutual trust and partnership between our countries and companies. Our Chinese partners from CNPC confirm that Gazprom is a reliable gas supplier,” said Gazprom head Alexey Miller.
The new deliveries will be settled in euros, as both countries look to diversify from the US dollar. Moscow’s latest plans to pivot its attention to China threatens to create additional challenges for Europe, which has been facing record-high energy prices over the past several months. Although Russia is currently its main supplier of natural gas, the European Union’s bureaucratic delays of Nord Stream 2, coupled with Russia’s changes to its energy transport infrastructure could pose future implications for Europe.
Information for this briefing was found via Gazprom. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.