Gas deal to bring benefits, price pressure for China

BEIJING - After securing the long-awaited gas agreement with Russia, China may have to take on more tasks on the energy front while enjoying the benefits, according to analysts.

One of the immediate benefits from the landmark deal was seen in China's equity market, where share prices of gas companies jumped across the board on Thursday.

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"The cooperation will bring new blood to China's domestic gas industry," said Sun Yang, an analyst with the commodity service website, www.chem365.net.

Sun expected pipeline construction, equipment manufacturers and gas companies to be boosted by the deal.

The 30-year gas supply deal, worked out on Wednesday in Shanghai between China National Petroleum Corp (CNPC) and Russia's state-controlled entities Gazprom, ended a decade of negotiation between the two countries.

CNPC said in a statement that the imported natural gas will mainly supply regions around Beijing, cities in northeast China as well as the Yangtze River Delta.

According to the agreement, the east route pipeline will start providing China with 38 billion cubic meters of natural gas annually from 2018.

The price details have not been disclosed but earlier media reports projected the contract price could be $400 billion.

Even though China has increased its gas imports in recent years, some gas importers ended up in losses due to a lower domestic natural gas price, thus discouraging some companies to increase gas imports.

Analysts widely agreed that if China can strike an imported price at 2.19 yuan (about $0.36) per cubic meter with Russia, it would be competitive for China.