Siberian Power fails to gain momentum

Despite announcements, Beijing continues to delay the construction of the gas pipeline that would represent a lifeline for Gazprom. Political and financial considerations are complicating the agreement on the terms of the contract to be concluded. Meanwhile, China is also looking to other suppliers to meet its needs, which are set to grow after 2030.

Moscow (AsiaNews) - Russian gas is much needed by China, but Beijing continues to delay the construction of the ‘Power of Siberia - 2’ gas pipeline, which Vladimir Putin has been requesting for years and which would be a lifeline for Gazprom, the Russian gas and oil giant reduced to a minimum after four years of war and Western sanctions.

Yet, the negotiations in Beijing on 2 September between Putin, Xi Jinping and Mongolian President Ukhnaagiin Khürelsükh had given the Russians hope, especially in the splendour of the ‘eastern front’ military parade on 3 September in Tiananmen Square.

An analysis of the Chinese economy's needs shows that supplies from the new plant would be sorely needed by 2030, and the project would take just five years to complete. China must carefully select its foreign supplies in anticipation of various geopolitical crises, while Russia must somehow compensate for its ever-decreasing exports to Europe.

Political and financial considerations, however, make it rather complicated to agree on the parameters of the contract to be concluded, as explained in an analysis by Carnegie Politika by Berlin-based specialist Sergei Vakulenko, reported in Meduza.

Currently, China is the only buyer capable of absorbing the quantities of gas that Russia is able to produce, and the issue does not only concern the European market, as even Europe would not be able to dispose of all the reserves of Siberian Yamal and guarantee Russia the respective earnings.

Even before the war in Ukraine, Gazprom was insisting on new projects to supply the Chinese market at very affordable prices, considering that the geology of the fields in Yamal allows production to be maintained at very low cost.

This area had already been in intensive production since 2010, with the opening of the Bovanenkov extraction source, which had added billions of cubic metres at very affordable costs. The gas pipeline from Yamal to China, the “Power of Siberia 2” project, immediately appeared very ambitious and also rather expensive: the distance from the Urengoy source to the Mongolian border is the same as that to the Ukrainian border, plus almost a thousand kilometres across Mongolian territory. However, on balance, deliveries would be cheaper than those to Europe via Ukraine, regardless of the war.

China currently uses over 400 billion cubic metres of gas per year, 60% of which comes from its own extraction and 40% from imports, about half of which comes from pipelines from Russia and Turkmenistan, while the other half of exports consists of liquefied natural gas.

At the same time, China is already one of the leaders in the field of renewable energy, which is set to grow significantly in the near future. The share of gas in the country's electricity supply is still rather low, while coal remains above 50%, and replacing coal with gas would be essential to reduce CO2 emissions by almost half, greatly improving air quality, especially in large cities, a priority task for China today.

According to forecasts by specialists at Cnpc, China's leading oil company, demand for gas in China will rise to 600-670 billion cubic metres by 2040, and the domestic industry will be able to produce a maximum of 310 billion, meaning that in the second half of the 2030s, the Chinese will have an absolute need to import gas from abroad.

Today, this also happens from Qatar, Australia, Russia and Malaysia, with 15% from smaller exporters; and China is looking for them in all latitudes, such as Tanzania and other countries. But the race is on, and the Russians must prove that they are cheaper and faster, without wasting too much time launching missiles at Ukraine.