We go to the East: Gazprom decided to become the main supplier of gas to China

Will China be able to replace Russia in Europe

The energy turn to the East is beginning to take on concrete features. Russia is likely to become the largest supplier of gas to the Chinese market. Kirill Polous, Deputy Head of the Department, Head of the Gazprom Department, spoke about this at the St. Petersburg International Gas Forum (SPIGF-2022). Will the Celestial Empire be able to replace Gazprom with Europe, how long it will take and how the supply volumes will change, MK figured it out.

“Taking into account the previously signed contract for the supply of gas under the Power of Siberia project, the total contracted volumes amount to 48 billion cubic meters. m. With a high degree of probability, after reaching the specified volume of deliveries, Russia may become the largest supplier of gas to China. At the same time, it is also important that, by developing cooperation in the gas industry, Russia and China do not increase their mutual dependence to critical levels,” Polous said.

According to energy market experts, taking into account the fact that Gazprom can build another gas pipeline to China, Power of Siberia-2, the capacity could potentially increase to 70-80 billion cubic meters of gas per year. But this will take several years and serious investments.

As you know, the company spent at least 5 billion euros on Nord Stream 2, leading to Europe, without taking into account losses, since the main gas pipeline (MGP) was supposed to be put into operation before May 2019 in order to supply 55 billion cubic meters to the European Union gas per year. Russia supplies raw materials to Europe via five routes: Nord Stream, South Stream, Turkish Stream, Yamal-Europe and the Ukrainian GTS. The total capacity is up to 200 billion cubic meters per year, on average, 179-190 billion cubic meters have been supplied in recent years.

One gas pipeline leads to China – the Power of Siberia, through which a maximum of 35 billion cubic meters can be supplied. Therefore, to say that China will replace European volumes is at least premature, says Artem Deev, head of the analytical department at AMarkets. This requires an appropriate infrastructure and volumes of consumption.

Meanwhile, China buys gas, including liquefied natural gas (LNG), not only from Russia, but also from other states – the United States, Australia, Qatar, etc. And besides, a couple of years ago, the largest gas field was discovered in China, which can provide China with raw materials for decades, the expert says. There are no technologies yet to extract this gas at great depths, but China can create them.

“Russia has the potential to take the largest share of the Chinese gas market, but this is not only a matter of infrastructure, but also of price. China prefers to buy raw materials at the moments of maximum decline. And how profitable it will be for Russia, if it manages to build expensive gas pipelines to China with a current budget deficit of 1.5 trillion rubles and a 30% drop in gas exports,” concludes Deev.