Russia to boost gas supplies to China, signs deal for new pipeline

The move comes as Russia seeks to expand its energy ties with China, its largest trading partner, after losing significant market share in Europe due to sanctions following the 2022 Ukraine conflict.

Reuters reported last month that China was seeking to buy more Russian gas through an existing pipeline as talks between the two countries had failed to make significant progress on building a new link.

Alexei Miller, the CEO of Russian state-controlled Gazprom GAZP.MM, told Russian news agencies on Tuesday that an agreement had been reached to increase supplies via the existing Power of Siberia pipeline, which runs from Eastern Siberia to China, to 44 billion cubic metres (bcm) a year from 38 bcm.

Russia and China also agreed a deal to construct the Power of Siberia 2 pipeline, capable of delivering 50 bcm per year to China through Mongolia from the Bovanenkovo and Kharasavey gas fields in Yamal, Miller was quoted as saying.

"Today, a legally binding memorandum was signed on the construction of the Power of Siberia 2 gas pipeline and the Soyuz Vostok transit gas pipeline through Mongolia," Miller said, Russian news agencies reported.

The prices of gas supplies to China are lower than those Russia charged European buyers, Miller said, due to the vast distances and terrain over which pipelines had to be built, Miller said, adding that Power of Siberia 2 would be the world's biggest and most capital-intensive gas project. It was not clear who will build the pipeline and the final investments have not been disclosed.

Speaking after President Vladimir Putin met Chinese President Xi Jinping and Mongolian President Ukhnaagiin Khurelsukh in Beijing, Miller said that prices for gas delivered through the Power of Siberia 2 will be negotiated separately, Russian news agencies reported.

China's state news agency Xinhua also reported on Tuesday that the two heads of state held in-depth discussions and signed over 20 bilateral cooperation documents in fields, including energy.

Gazprom shares edged up 0.5% in Moscow trading.

CHINA BUYING

The so-called "no limits" partnership between China, the world's biggest consumer of energy, and Russia, the world's biggest producer of natural resources, has strengthened since the West imposed onerous sanctions to punish Russia for the war in Ukraine.

China is now Russia's biggest trading partner, the biggest purchaser of Russian crude and Russian gas, the second-biggest purchaser of Russian coal and the third-biggest purchaser of Russian LNG, according to the Kremlin.

Gazprom supplies natural gas to China through a 3,000 km (1,865 mile) pipeline called Power of Siberia under a 30-year, $400 billion deal launched at the end of 2019.

In 2024, exports amounted to about 31 billion cubic meters (bcm). It is expected that supplies will reach the planned capacity of 38 bcm this year.

In February 2022, China also agreed to buy up to 10 bcm of gas annually by around 2026-2027 via a pipeline from Sakhalin Island in Russia's Far East.

Miller said an agreement had been reached to increase gas supplies via the Far Eastern route to 12 bcm from the 10 bcm.

But Russia's gas exports to China are still a small fraction of the record 177 bcm it delivered to Europe in 2018-19 annually.

Russian gas now accounts for just 18% of European imports, down from 45% in 2021, while the bloc's oil imports from Russia have fallen to 3% from around 30% over that time. The European Union plans to fully phase out Russian energy by 2027.