What's in Power of Siberia for Russia?

What's in Power of Siberia for Russia?

Russia has started gas supplies to China via the Power of Siberia pipeline today. The official opening ceremony was attended by Russian President Vladimir Putin and Chinese President Xi Jinping via a TV link-up.

Gazprom CEO Alexei Miller welcomed the two leaders from the Atamanskaya compressor station on the border with China. "Dear Vladimir Vladimirovich, allow me to give a command to open the pipeline valve," Miller said addressing to Putin.

On receiving Putin’s permission, the head of Gazprom said: "Dear Vladimir Vladimirovich, dear Xi Jinping, the valve has been open. Gas is flowing to the gas transmission system of the People’s Republic of China."

Putin said that the launch of the pipeline brings energy cooperation between Moscow and Beijing to a new level and puts closer to fulfilling the task of bringing bilateral trade turnover to $200 bln in 2024.

A senior analyst of 'Uralsib', Alexei Kokin, speaking to Vestnik Kavkaza, noted that the Power of Siberia pipeline is a a powerful tool for diversifying Russia's gas exports. The pipeline will help Gazprom diversify its sales markets, especially at a later stage of development. Initially, supplies will not be very large, 5 billion cubic meters are expected in the first year, then an increase to 15 billion cubic meters is planned, but they will allow Gazprom to get a market share in the Chinese market. It’s important to emphasize that we are talking about diversification of pipeline deliveries, since we also supply liquefied gas to Asia. Pipeline gas has historically been supplied only to Europe, Turkey and the CIS countries. Today, Russia has gone beyond these gas markets for the first time," he explained.

"Further, the Power of Siberia has prospects for expansion in terms of supply, which, of course, will depend on demand in the Chinese market. And this demand, in turn, depends on a variety of macroeconomic factors in China. And not on just them, also on climate change, the Chinese energy industry's need to get away from coal, etc. In general, the prospects are quite large, Gazprom has an extensive natural base in Eastern Siberia, so now it’s up to the growing demand in China and China's pricing policy acceptable for Russia ," Alexei Kokin emphasized.

Initially, the opening of the pipeline was planned for December 20 but the construction was completed ahead of schedule.

The gas pipeline’s total length is about 3,000 km. Its capacity is 61 bln cubic meters of gas per year, including 38 billion cubic meters for export. The route of the gas transmission system is along the operating East Siberia - Pacific Ocean main oil pipeline, making possible to optimize infrastructure and power supply costs.

Chayanda and Kovykta gas fields with reserves of 1.2 trillion and 2.7 trillion cubic meters of gas respectively are the resource base for the Power of Siberia gas pipeline. Development of the Chayanda’s gas pool started in 2015. The design production on the field is planned as 25 bln cubic meters of gas annually. Production on the Kovykta field will start after 2022. Its production will also be 25 bln cubic meters of gas per year.

The ‘eastern route’ agreement (from Blagoveshchensk to China) was signed with CNPC on May 21, 2014. The total price of the contract on annual supplies of 38 billion cubic meters of gas to China amounted to $400 bln.