Gazprom, CNPC agreement to supply gas to China

Russia’s gas giant Gazprom and China National Petroleum Corporation (CNPC) have signed an agreement on terms of Russia’s gas supplies to China via eastern route. The signing ceremony was held in the presence of the Russian and Chinese presidents, Vladimir Putin and Xi Jinping, on the sidelines of the G20 summit in St. Petersburg on Thursday. According to earlier information, the pricing parameters of the Russian gas supplies are expected to be coordinated before the end of the year. In March, Gazprom and CNPC inked a memorandum of understanding on Russia’s gas pipeline deliveries to China via eastern route. Under the document, the planned volume of Russia’s gas supplies at 38 billion cubic metres en route may be raised owing to LNG deliveries from the Vladivostok-based LGN refinery. Back then, Gazprom CEO Alexei Miller stated that Russia might receive a payment in advance for its gas export to China. Cost of the gas transit system (Sila Sibiri) up to a branch with China was preliminary estimated at 770 billion roubles (USD 1 = RUB 33.39). Therefore, the advanced payment might be at 25 billion U.S. dollars. In June, CNPC made a new proposal pertaining to the gas pricing formula. China’s national company offered to tie it with cost of the Henry Hub LNG blend. Back then, Gazprom declared that it was not ready to link prices for the Russian gas supplies to China with LNG prices on the U.S. market.