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"Contract of the Century"
Since 2018, Russia will start supplying natural gas to China, planning to reach a figure of 38 billion cubic meters of gas annually
However, this "contract of the century", which attracted the attention of the whole world, for China, in addition to benefits, is fraught with certain difficulties. There are four main problems: 1. Will there be enough gas for Chinese consumption? 2. How will the difference in prices for domestic and imported gas affect the state of the market? 3. The problem of combining gas pipelines with different standards. 4. Impact of Russian gas supplies on the geopolitical situation.
Will there be enough gas?
Price does not match demand
According to the Ministry of Energy of the Russian Federation, as well as according to forecasts of the Chinese media, the price per 350 cubic meters of gas was $ 10.5 ($ 2.2 per million British thermal units) or 9 yuan per cubic meter, which, according to the Russian side, is the lowest price for foreign partners. ... According to information from open sources, the most expensive gas supplied to China today is Turkmen ($ 8 per million British thermal units), Uzbek is a little cheaper - $ 3 per million British thermal units, the cheapest gas is Kazakh ($ 3.3 per million British thermal units). Speaking about Russian gas, it is worth noting that, taking into account all markups, the price for it could reach XNUMX yuan per cubic meter.
Of course, the price offered by Moscow is lower than the prices paid by the eurozone countries. For example, in France, Germany and Italy, Russian gas is supplied at prices ranging from 415 to 455 dollars per thousand cubic meters. Nevertheless, it is worth thinking about the end consumers in China itself. In the case of households, they will most likely first think about the use of purely Chinese gas. In the case of industrial enterprises, the use of Russian gas will mean an increase in the cost of production of final products. Some enterprises, especially those sensitive to gas price increases, even expressed a desire to stop using gas in the light of price increases.
Diameter mismatch
According to the terms of the agreement, the Russian side is responsible for the development of deposits, gas processing, and the construction of a gas pipeline on the territory of Russia, PetroChina is responsible for the construction of the Chinese part of the gas pipeline, gas storage facilities and other related infrastructure facilities.
During the construction of the pipeline, large diameter pipes from 1016 to 1420 mm will be used, which is justified both from an economic point of view and from the standpoint of saving raw materials. However, the use of large diameter pipes is associated with certain difficulties for China. During the construction of the West-East gas pipeline (in China), only Chinese pipe rolling with a diameter of 1219 mm pipe was used, but the production of pipes with a diameter of 1420 mm, which will be used in the construction of a gas pipeline in Russia, still exists only on paper. In addition, there are problems associated with the organization of construction of facilities, their functioning after commissioning. Unlike China, Russia has more than a century of experience in the construction and operation of gas pipelines, and the production of pipes of diameter 1420 mm was established in the USSR, their share in the gas pipeline network of the Russian Federation is over 60 percent.
Geopolitics can not be discounted