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Alexey Miller speaks at CNPC’s roundtable on oil and gas cooperation as part of Belt and Road Forum

#China #Eastern Gas Program #IR releases #Power of Siberia

A roundtable on oil and gas cooperation was held today by China’s CNPC at the Belt and Road International Forum in Beijing. The event was attended by a Gazprom delegation led by Alexey Miller, Chairman of the Gazprom Management Committee.

In his speech at the roundtable, Alexey Miller noted that natural gas formed the basis for building an effective hi-tech economy. Thanks to its abundant availability, competitive prices, flexible supply channels, and diverse fields of application, gas is a perfect energy source that can help ensure the sustainable development of the energy industry for decades to come.

Asian countries, above all China, have a similar vision of the future of the global energy industry. The Chinese Government is implementing a large-scale coal-to-gas program. In 2016 alone, over a thousand coal mines were shut down, with coal consumption and production dwindling for three consecutive years. Decommissioned capacities are mainly compensated by increased gas-fired power generation.

China is one of the world’s biggest natural gas consumers. At the same time, the share of gas in the country’s energy mix is a mere 6 per cent. The Chinese Government intends to raise that figure to 8.3–10 per cent by 2020. In the context of China’s economy, even a 1 per cent increase for gas in the energy balance could mean tens of billions of cubic meters in gas imports. Such amounts cannot be secured by the growing indigenous production alone.

With its tremendous capabilities and unique competencies in the gas sector, Gazprom is committed to help China bring its ambitious plans for gas market development to fruition. The Company is currently building the Power of Siberia gas trunkline as part of the project for Russian gas supplies to China via the eastern route. It is the world’s largest investment project in the field of gas transportation. As of May 16, 2017, 745 kilometers of the pipeline were built and 1,009 kilometers were welded in one string. Gazprom is negotiating future gas deliveries from Russia’s Far East. It is planned to reach an agreement on the supply terms by the end of 2017.

Gazprom’s cooperation with Chinese companies is not limited to gas supplies. On May 15, 2017, three contracts were signed at the Belt and Road Forum to conduct pre-development surveys for the purposes of creating underground gas storage facilities in China’s Heilongjiang and Jiangsu provinces.

Gas-fired power generation is yet another important area for collaboration between Gazprom and Chinese companies. In the course of the Belt and Road Forum, Gazprom, CNPC, and China Huaneng Group signed a Memorandum of Understanding to pursue joint efforts in the power sector within China. Power generation projects could give a new dimension to the established contract relationship, with commercial terms based on joint businesses in the Chinese territory.

Alexey Miller underlined the enormous potential of Russian-Chinese interaction in the use of liquefied natural gas as a vehicle fuel. The Silk Road Economic Belt project proposed by the Chinese Government entails the creation of the Europe – Western China international transport corridor, which will stretch for some 2,300 kilometers just in the Russian territory. On May 15, 2017, Gazprom, CNPC, Russian Highways, and China Communications Construction Company Ltd. inked a Memorandum of Cooperation aimed at developing road infrastructure and promoting the use of liquefied natural gas as a vehicle fuel along the aforementioned route.

Russia and China also continue to expand their collaboration through such projects as the Silk Way international rally initiated by Gazprom. Similar to the Europe – Western China transport corridor, the race passes through Russia, Kazakhstan, and China.

“Gas pipelines not only bring heat to homes, but also serve as a common thread for different economies, helping them thrive and develop. There is no doubt that the steel arteries of our gas trunklines, along with transport corridors running for thousands of kilometers, will become a symbol of the ever-growing strategic cooperation and connectivity between Russia and China in the 21st century, a shining example for the rest of the world,” said Alexey Miller in conclusion of his speech.

Background

The roundtable participants included Liu He, Executive Director for Regulation of China’s National Energy Administration, Wang Yilin, Chairman of the Board of Directors of CNPC, Zhang Jianhua, President of CNPC, Sauat Mynbayev, Chairman of the Board of KazMunayGas National Company, Alisher Sultanov, Chairman of the Board of Directors of Uzbekneftegaz, Rovnag Abdullayev, President of the State Oil Company of the Azerbaijan Republic, Wang Yupu, Chairman of Sinopec, Yuan Guangyu, Chief Executive Officer of CNOOC, Wang Yanzhi, President of Silk Road Fund, Wang Gefan, Chief Operations Officer of China Development Bank, Chan Chauto, President of CEFC China Energy Company Ltd., and other representatives of energy and financial companies.

Gazprom’s main partner in China is CNPC, a state-owned oil and gas company.

In 2014, Gazprom and CNPC signed the Sales and Purchase Agreement for Russian gas to be supplied via the eastern route (Power of Siberia gas pipeline). The 30-year Agreement provides for gas deliveries to China in the amount of 38 billion cubic meters per year.

In 2015, Gazprom and CNPC inked the Heads of Agreement for pipeline deliveries of natural gas from Western Siberian fields to China via the western route (Power of Siberia 2 gas pipeline).

In 2015, Gazprom and CNPC inked the Memorandum of Understanding for the project of pipeline gas supplies to China from Russia’s Far East.

In 2016, Gazprom and CNPC signed the Memorandum of Understanding on underground gas storage and gas-fired power generation in China.

On November 7, 2016, Gazprom and CNPC signed the Memorandum to explore the opportunities for cooperation in the NGV sector.

 

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