The construction of the Power of Siberia gas pipeline, through which Russian gas enters China, was described as the “deal of the century” by Russian President Vladimir Putin on the eve of the visit of the President of the People’s Republic of China, Xi Jinping, who arrived in Moscow on Monday.
“The Russian-Chinese main gas pipeline Power of Siberia has, without exaggeration, become the ‘deal of the century,'” Putin wrote in his article for the Chinese publication Zhenmin Zhibao, quoted by the Russian publication “Moscow Times”. draws attention to the “substantial growth” of Russian oil and coal supply volumes to China, the construction of new nuclear units, the involvement of Chinese companies in liquefied natural gas projects and the doubling of bilateral trade, which has reached $185 billion.
The memorandum for the construction of the “Power of Siberia” gas pipeline was signed between Moscow and Beijing in 2014, and the laying of the approximately 3 thousand km long route was completed in 2019 and its price exceeded 1.1 trillion. rubles. It transports raw material from the Chayandin deposit in Yakutia and the Kovikt deposit in the Irkutsk region to China.
According to the 30-year contract signed between Gazprom and the state-owned Chinese company CNPC, Russia must supply 38 billion cubic meters of gas annually. However, the introduction of the capacity of the gas pipeline is gradual and in 2021 the delivery was only 10.4 billion cubic meters, in 2022 it reached 15.5 billion cubic meters, and this year the capacity is expected to increase to about 22 billion . cubic m.
The terms of the trade agreement, concluded after Russia annexed the Ukrainian peninsula of Crimea in 2014, are kept secret. But it is clear that the value of gas for China is significantly lower than the market quotations and prices of “Gazprom” for Europe. Currently, Gazprom’s price for China is around $290 per 1,000 cubic meters, commented BCS analyst Ronald Smith, citing data from Chinese customs. For comparison, in December, Gazprom’s price for its European customers was $1,000 per 1,000 cubic meters, which means a discount of 70 percent, according to the Moscow Times.
For the first quarter of 2023, the price of gas for China fell again – to 120 dollars per 1000 cubic meters. Even in Belarus, Russia sells more expensively – for 128.5 dollars per 1000 cubic meters.
It is practically impossible for “Power of Siberia” to pay off its expenses due to the high investments in the construction and the low contract price,” commented a while ago the partner and senior analyst of the consulting company “RusEnergy” Mikhail Krutikhin. “Back in 2017, the then Minister of Energy Alexander Novak, who is also deputy prime minister, stated in the State Duma that this is not a commercial project. That is, it will never pay off,” Krutikhin pointed out.
In his words, the Kremlin needs this pipeline to “puff up its cheeks”. “This project looks like an expensive thing for show, and the only ones who benefit from it are the construction contractors, and their contracts are inflated,” Krutikhin also said.