Russia Takes Advantage Of The “Gas Shortage” To Sell Natural Gas To China At A Price Increase

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There was some major news on Russian and Chinese fuel transactions recently. On December 14 of 2020, at the regular press conference of the Ministry of Commerce, the spokesperson of the China Ministry of Commerce, Gao Feng, responded to reporters’ questions regarding the unresolved “gas shortage”. Since entering the 2017 winter heating season, with the emergence of a “gas shortage” in many northern provinces, there have been reports that Russia has taken the opportunity to increase prices to export natural gas to China. In response, the peak said: “At present, the Chinese Ministry of Commerce has not monitored such a situation. ”

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Gao Feng introduced that from the January-November imports of this year, Russia is my country’s 11th largest source of LNG imports. According to my country’s customs statistics, from January to November this year, my country imported 60.696 million tons of natural gas, a year-on-year increase of 26.5%. Among them, 384,000 tons were imported from Russia, a year-on-year increase of 49.6%, accounting for 0.63% of my country’s total natural gas imports.

The number of imports from Russia does not look large. But Gao Feng also responded that China and Russia have great potential for cooperation in this field. On December 8 this year, the first phase of the Yamal LNG project, a major Sino-Russian energy cooperation project, was officially put into operation. The annual production capacity will reach 5.5 million tons. It is expected that the annual production capacity will reach 16.5 million tons after the completion of the third phase. One third will be shipped to China. At the same time, the two countries are also constructing the Sino-Russian east route natural gas pipeline. China will continue to actively support enterprises to diversify the import of natural gas resources from overseas, including Russia, while increasing domestic natural gas production.

The Yamal LNG project mentioned by Gao Feng is an Arctic energy cooperation project completed by China and Russia in four years. The project is located at the port of Sabetta at 72 degrees north latitude and 72 degrees east longitude, in the Arctic Circle in Russia. It belongs to the world’s super large-scale natural gas exploration and development, liquefaction, transportation, and sales integration project. It is currently developed globally in the Arctic region. The largest LNG project. In the construction of the project, Chinese companies have undertaken 85% of the construction of all modules. At the ceremony for the first production of the Yamal project, Russian President Vladimir Putin also visited the LNG loading site.

It is reported that the first LNG of the Yamal project will be transported to China through the Arctic West Channel. The three production lines of the project are scheduled to be put into operation in 2019. At that time, at least 4 million tons of LNG will be supplied to China steadily each year, which is equivalent to China’s LNG imports in 2016. 1/16 of the total.

In addition to LNG cooperation, the highly anticipated Sino-Russian East Route natural gas pipeline construction is under intense construction. On December 13, the summary of the test section of the Sino-Russian East Route Natural Gas Pipeline Project of PetroChina and the mobilization meeting for comprehensively accelerating the construction was held in Langfang, Hebei. At 11:48 in the morning of the same day, 11 points of the Heihe-Changling section of the Sino-Russian Eastern Route at the Heihe River construction site in Heilongjiang were fired and welded at the same time, which to some extent reminded the internal section of the Sino-Russian Eastern Route Natural Gas Pipeline Project. Accelerating construction.

The Sino-Russian Eastern Route Natural Gas Pipeline project starts at the Sino-Russian border in Heihe City, Heilongjiang Province, and passes through 9 provinces, autonomous regions, and municipalities including Heilongjiang, Jilin, Inner Mongolia, Liaoning, Hebei, Tianjin, Shandong, Jiangsu, and Shanghai, and ends in Shanghai. At 3,371 kilometers, it is the long-distance natural gas pipeline with the largest diameter and the highest pressure in my country.

Before the construction of the Sino-Russian Eastern Route, China’s pipeline natural gas imports were mainly concentrated in the southwest and northwest directions. The first is natural gas from Central Asia, which is sent to Beijing, Shanghai and Guangdong through the West-East Gas Pipeline, and the second is the China-Myanmar Pipeline in the southwest, which is imported from Yunnan to the southwest and southeast provinces. The lack of a north-south natural gas transmission channel in the provinces of North China and East China, which is currently the fastest growing region of natural gas in China, restricts the large-scale adjustment of the energy structure in this region. In the future, the Sino- Russian Eastern Route Natural Gas Pipeline can first solve the current gas shortage problem in the Northeast; the middle section runs from Changling to Yongqing, Hebei, and then enters the entire Beijing-Tianjin-Hebei pipeline network; the southern section runs from Yongqing to Shanghai to ensure that all provinces along the way Natural gas demand.

After the completion of the Sino-Russian East Route Natural Gas Pipeline, it will be able to transport 38 billion cubic meters of natural gas to the Northeast and East China each year. It is estimated that the replacement of coal with these gas volumes can reduce carbon dioxide emissions by 163.78 million tons, sulfur dioxide emissions by 1.82 million tons, nitrogen oxide emissions by 460,000 tons, and dust emissions by 840,000 tons per year.

The Sino-Russian East Route natural gas pipeline project is a cooperation between China and Russia after 20 years of long negotiations. In May 2014, China and Russia signed this super energy order with a total value of more than 400 billion U.S. dollars, an annual gas supply of 38 billion cubic meters, and a 30-year period. After the cooperation on the Western Route project was reached, in November of the same year, the Sino-Russian East Route natural gas pipeline project reached another cooperation. At that time, President Xi Jinping and President Putin jointly witnessed the signing of a framework agreement between PetroChina and the Russian company.

The agreement stipulates that in the future, Russia will supply 30 billion cubic meters of gas per year to China through the Sino-Russian West Route Natural Gas Pipeline, with a gradual increase in gas supply period of 4 to 6 years and a gas supply period of 30 years. The gas supply project is of great significance for optimizing my country’s energy consumption structure, transforming the economic development mode, and promoting the economic development of the central and western regions.

After the Sino-Russian east and west routes are fully put into production, China will import more than 68 billion cubic meters of natural gas from Russia each year. What is the concept of this number? According to the “China Natural Gas Development Report (2017)” jointly issued by the Department of Petroleum and Natural Gas of the National Energy Administration, the Resource and Environmental Policy Research Institute of the Development Research Center of the State Council, and the Oil and Gas Resource Strategy Research Center of the Ministry of Land and Resources, China’s apparent natural gas consumption in 2016 was 205.8 billion cubic meters (excluding gas supply to Hong Kong and Macau). This year, domestic natural gas production was 136.9 billion cubic meters, and imported natural gas was 72.1 billion cubic meters. In other words, in the future, the supply of natural gas through the Sino- Russian pipeline alone will be close to all of China’s current imports, and it will also reach half of the current domestic natural gas production. Russia’s role in China’s natural gas map in the future can be seen.

However, the Sino-Russian West Route natural gas project is still in the process of negotiation. On November 1 in 2020 at the 22nd regular meeting of the Chinese and Russian prime ministers, the two nations revealed that the 2 countries have agreed to continue to promote the West Route natural gas pipeline gas supply negotiations. At that time, Li Keqiang pointed out that both parties believe that it is necessary to innovate the Sino-Russian energy cooperation model on this basis to carry out upstream and downstream integration cooperation, and carry out cooperation in the capital field to achieve mutual benefit and win-win results.

How will Russian relations and Chinese coexistence in the fuel industry work out in 2021 and beyond? Only time will tell.