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    China Starts Extending Pipe Carrying Russian Gas


The extension of the China-Russia East pipeline will allow Gazprom to reach further into the Chinese market.

by: Joseph Murphy

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China Starts Extending Pipe Carrying Russian Gas

Construction has begun on the southern section of the China-Russia East gas pipeline, Chinese state media reported on July 28.

The China-Russia East pipeline carries gas arriving in China from Russia's 38bn m3/yr Power of Siberia pipeline. Its southern section is 1,509 km long and begins in Yongqing in the northern Hebei province and ends in Shanghai in the country's east. It is due online in 2025, the same year that Power of Siberia is due to reach full capacity, and will pump up to 18.9bn m3/yr of gas to the Yangtze River delta region.

Overseeing the project will be PipeChina, China's newly-formed oil and gas pipeline operator.

Despite a slowdown in Chinese gas demand this year, Gazprom has said it is negotiating an increase in gas deliveries via Power of Siberia to 44bn m3/yr, requiring the pipeline's expansion. It is also studying the construction of Power of Siberia 2, which would pump an extra 50bn m3/yr of gas to China from Gazprom's Arctic fields.

Including potential piped supplies from the Russian Far East, Gazprom estimates it could eventually send up to 130bn m3/yr of piped gas to China. But Beijing and Moscow will need to agree contracts for these extra volumes, which could take considerable time.

Some 160bn m3 of projected Chinese gas demand in 2035 is not covered with contractual supplies yet, Russia's VTB Capital estimated in a research note on July 24. However, Sberbank CIB believes China is more likely to rely on extra LNG spot cargoes to meet rising demand in the medium term. As most Chinese import growth over the next five years will be rising supply via Power of Siberia, the bank said Beijing was in "no hurry" to sign new contracts with Gazprom.