China is primed to buy even more natural gas from Russia, as Gazprom, Moscow’s state-backed energy giant, has begun testing a key supply hub that could reroute energy from Europe. The company announced yesterday that it has started testing the supply of gas from the Kovykta field, the largest in east Siberia, into the Power of Siberia pipeline that carries gas to China. This is part of Vladimir Putin’s efforts to replace Europe as the largest buyer of Russian gas, as the European Union scrambles to end its reliance on Moscow’s energy exports. Gazprom noted that it expects the new gas transportation system from Kovykta to be operational by this December.
Over the past few years, Russia has been ramping up exports of gas to China, as Gazprom exported 4.1 billion cubic metres of gas to China in 2020, rising to around 11 bcm in 2021 and expected to reach 22 bcm in 2023.
Given the Power of Siberia pipeline has a capacity of 38bcm, Gazprom could ramp up its supplies to China even further.
Over the past year, Putin has been gradually squeezing gas flows to the European Union, in retaliation for the sanctions placed on Russia following its invasion of Ukraine. Ties between Moscow and the EU have worsened as the bloc vowed to end its reliance on Russian gas by the end of the decade.
Meanwhile, as Russia severs ties with the West, Putin has been turning East, looking to increase the amount of gas it sells to China through new gas pipelines and LNG exports.
Russia has announced the Nord Stream 2 pipeline, the £8billion project that was set to pump gas to Europe through the Baltic Sea, will now be replaced by a new pipeline which will export huge amounts of gas to China.
However, experts have previously warned Russia’s actions in Ukraine and its threat to cut off gas to the West, have left Putin with very few countries as potential buyers, thus reducing its leverage when negotiating contracts.
Speaking to Express.co.uk, John Baldwin, the managing director of CNG Services said: “If Putin is sending his gas east, he’s only really sending it to China, and he won’t be in a good negotiating position.
“He can’t send it West because he’s fallen out with the EU and the UK, he can only send it east and so he’ll get a very poor price. China will pay only the absolute minimum, and they might end up owning all the gas fields, owning all the pipelines.
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Plans to build the Force Siberia 2 pipeline received a major boost last month, when Putin held a meeting with his counterparts from China and Mongolia, where they discussed the major project.
Another factor that gives China the upper hand in negotiations is that according to industry experts, China is not expected to need additional gas supply until after 2030.
The Power of Siberia 2 pipeline could be years off, as an industry expert in Beijing said: “Fundamentally we see little support for Power of Siberia 2 to materialise before 2030 as China has secured enough supplies by then.
“It will be a tremendously complex negotiation which could take years, as it carries huge political, commercial and financial risks.”