Gazprom, CNPC Agreement Strengthens Russian-Chinese Cooperation
Russia’s Gazprom and China’s CNPC signed a legally binding agreement outlining the main conditions of pipeline gas supply from Russia to China, reads a note released by the Russian company on Thursday.
“Both parties stressed the long-term strategic nature of our partnership… The fact that the major terms and conditions were signed during the G20 summit indicates the parties’ aspiration to successfully end the negotiations and sign the contract before the end of 2013,” said Alexey Miller, Chairman of the Gazprom Management Committee.
The signing ceremony took place in the presence of Vladimir Putin, President of the Russian Federation, and Xi Jinping, President of the People’s Republic of China. The high-level attention testifies the relevance of the long-waited agreement.
According to the note, the two companies agreed on the export volume and starting date, the take-or-pay level, the period of supply build-up, the level of guaranteed payments, the gas delivery point on the border and the basic conditions of gas off-take.
The thorniest point was the definition of the price, condition that led to recurrent failed attempts to clinch agreements between the two BRIC countries. China signed consistent gas deals with Australia, Qatar and Turkmenistan. For instance, Chinese President Jinping and his Turkmen counterpart Gurbanguly Berdymukhamedov attended the ceremony inaugurating the 10bcm/a capacity building project in Mary, Turkmenistan.
Nonetheless, China came a step closer to a strategic deal after securing also a long term cooperation with Russian company Novatek. Gazprom managed to persuade Beijing that prices shouldn’t be linked to a hub located in Louisiana.
‘The price conditions will not be linked to the Henry Hub index,’ reads the note released on Thursday.
Gazprom, reluctant to accept Henry Hub as the global benchmark, said that the deal would be finalized by the start of 2014, while the pipeline is expected to be constructed by 2018.