Putin praises Gazprom, CNPC deal on Russian gas for China

The price of Russian natural gas for China under bilateral contract signed on Wednesday is based on the market price on oil and oil products, Russian President Vladimir Putin said.

Russian investments into the infrastructure for transporting gas to China, compressor stations will total $55 billion, according to Gazprom CEO Alexei Miller.Russian energy giant Gazprom and China National Petroleum Corporation signed a contract on Wednesday on Russia’s gas deliveries to China. The contract was signed in the presence of President Putin and his Chinese counterpart Xi Jinping.

Russian gas supplies to China via the eastern route may begin in four to six years’ time, Energy Minister Aleksandr Novak told the media.

The gas price formula for China is developed similar to that for Europe, Russian President Vladimir Putin told reporters in this Chinese city on Wednesday. “The gas price formula as in other our contracts is pegged to the market price of oil and oil products,” Putin said.

“This is linked to it as a formula of computing the price for European consumers. This is a formula which is pegged to the market price of oil and oil products,” Putin said.

The Russian president called the reached agreements on Wednesday as the largest ever in the history of the Russian and Soviet natural gas sector.

Putin added that Russia and China began joint work on the development of the western route of natural gas supplies to China with possible diversification of the route.He said it would take four years to implement the contract, while investments into the project would exceed $70 billion both from China and Russia.

The major contract signed on Wednesday was negotiated for several years. Gazprom expected to get $400 as a starting price for 1 thousand cu. m. of gas for China. The Chinese side wanted to buy gas for $350-360.

The price of Russian gas for China would be no less than $400 for 1,000 cubic meters, an expert of the Eurasian Development Research Center of the Chinese State Council said in April. Inclusive of infrastructure costs, supplies to China would cost no less than $400 for 1,000 cubic meters, given Russia’s export price of $380 for 1,000 cubic meters, he said.

Deputy Director of the Institute of Energy Strategy Alexei Belogoryev then estimated the contract price at $350-400 for 1,000 cubic meters. Director of the Energy Development Fund Sergei Pikin predicted a price of about $380.