China and Russia signed a memorandum on the construction of a gas pipeline to China via Mongolia "Power of Siberia 2".
This was announced to journalists by the “Gazprom” CEO Alexei Miller, Russian propaganda media report.
"Based on a public statement made by the leaders of three countries — Russia, China, and Mongolia — a legally binding memorandum was signed today on the construction of the ʼPower of Siberia 2ʼ gas pipeline and the ʼSoyuz-Vostokʼ transit gas pipeline through the territory of Mongolia. This project will allow for the supply of 50 billion cubic meters of gas per year from Russia via Mongolia," he said.
Deliveries under the new agreement are expected to be made over a period of 30 years.
In addition, Russia and China have agreed to increase supplies along other routes:
- "Power of Siberia" — capacity will increase from the current 38 billion m³ to 44 billion m³ per year;
- "Far Eastern Route" — the volume of gas pumped will increase from the planned 10 billion m³ to 12 billion m³ of gas per year. The launch of this pipeline is expected in 2027.
Miller added that the price of gas supplies to China is lower than to Europe, but did not specify specific amounts.
What preceded
As the WSJ reported, Power of Siberia 2 (a continuation of the Power of Siberia pipeline opened in 2019) has long been more relevant to Moscow than to Beijing. Russia lost its largest energy market when much of its gas exports to Europe were cut off after the invasion of Ukraine.
For Beijing, gas supplies from the Middle East and elsewhere meant that the new project with Russia was much less important. The new pipeline project has been mired in disagreements over pricing and ownership terms, as well as China’s concerns about becoming overly dependent on Russia for energy supplies.
WSJ sources close to Beijing’s decision-making process said that one of the official reasons they gave to Russia was that China limits its oil and gas imports from a single country to 20%. As a result, negotiations dragged on for years, even though Moscow had repeatedly said a deal was imminent.
But the recent conflict in the Middle East has given Beijing reason to reconsider the reliability of the oil and natural gas it receives from the region, sources say, even as a fragile ceasefire has taken hold between Israel and Iran.
In addition to the current turmoil in the Persian Gulf, the trade war between the United States and China in recent months has halted American liquefied natural gas exports to China, halting years of growth in energy trade between the two countries.
In the long term, as China seeks to achieve its green energy goals, Beijing wants to expand natural gas’s role as a so-called bridge fuel between the hydrocarbon and post-hydrocarbon eras, analysts say.
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