Energy

China hopes for Russian gas breakthrough

By Chris Buckley (China Daily)
Updated: 2011-06-09 10:24

BEIJING - China said on Tuesday that it hopes for a "major breakthrough" in gas talks with Russia ahead of a visit next week by President Hu Jintao, who has made securing energy for the world's second-biggest economy a diplomatic priority.

At a briefing in Beijing, China's Assistant Foreign Minister Cheng Guoping held back from saying that agreement was assured on pricing and other issues that are holding up a final deal for Russian natural gas supplies.

But Cheng said he was confident, and noted that "the governments and companies of both sides have been actively engaged in work and negotiations".

"Personally, I'm confident that if progress is smooth, then it's quite likely that in the near future, and even before President Hu visits, both sides will achieve a major breakthrough in cooperating over natural gas," he told a news conference.

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Last week, Russia's Deputy Prime Minister Igor Sechin said OAO Gazprom and China National Petroleum Corp, which control the two countries' gas pipelines, had been tasked to prepare a package of contracts for signing before June 10.

Moscow has also said it wants to settle the long-discussed deal with China in time for the visit by President Hu, which would fit in with repeated promises to strike a deal around the middle of 2011.

The confident anticipation of a deal from both sides suggests they have bridged the divide over prices, which officials had long said was the main obstacle to a final deal.

Hu will arrive in Russia next week after visiting Kazakhstan for a summit of the Shanghai Cooperation Organization, which brings together Beijing, Moscow and central Asian governments to help coordinate security and economic policy in that region.

After visiting Moscow and St. Petersburg, Hu will visit Ukraine.

In 2006, Prime Minister Vladimir Putin, who was Russia's president at the time, launched the ambitious plan for an eastern gas pipeline network during a visit to Beijing.

The prospect of an eastern gas pipeline route, following a deal on an oil pipeline that is now up and running, offered Gazprom a big second market to counterbalance its supplies to Europe, which Putin worried had too much of a hold on Russian gas exports. For China, imports of Russian gas will provide a further pillar to prop up its rapidly growing gas market, which is already attracting rising volumes of liquefied natural gas by ship and receiving Turkmen gas through a pipeline.

To keep supply ahead of demand, China is also investing heavily in developing its own gas deposits, including alternative sources such as shale gas and coal-bed methane.

According to a joint document signed in October 2009, China should start getting gas through the Russian pipeline in 2014-2015. Sechin said last week that Russia would deliver 68 billion cubic meters a year for 30 years via two routes, one to the west of Mongolia and one down Russia's eastern seaboard.