Second LNG pipeline to link Russia, China

Russia and China could soon sign another major contract for gas pipeline construction after inking a landmark 30-year gas deal in Shanghai during Russian President Vladimir Putin's state visit in May, a senior Russian official said Wednesday.

"Given the pace of Chinese economic growth ... with an agreement on the compromise (gas) price formulas having been achieved, it is very likely that a contract could be signed in the very near future for the construction of a western route (gas pipeline) that will fully cross the Siberian Federal District," Russian Presidential Administration Chief Sergei Ivanov told reporters in the Siberian city of Novosibirsk.

He said the contract on the western route, also called the Altai Natural Gas Pipeline, might be "less capital-intensive" than the eastern one, but "it's no doubt going to cost us tens of billions of dollars," ITAR-Tass news agency reported.

The official said this project, like the eastern one, would create jobs and stimulate many industries, which would have "a cumulative effect" on the economy.

The long-awaited gas deal in Shanghai ended a decade of natural gas supply talks between the two neighbors.

According to the $400 billion deal, Russia will deliver up to 38 billion cubic meters of natural gas annually to China via the eastern route starting in 2018.

The previous agreement also noted that Russia plans to add another 30 billion cu m of gas supply to China using the western pipeline without a clear timetable.

An analyst who declined to be named said the "coming" western pipeline construction contract shows that Russia is eager to find new buyers along the western route in order to lessen its dependence on Ukrainian and European gas buyers.

"It is a politically strategic move," the analyst said.

The analyst alternatively suggested that the gas supply via the eastern pipeline from Russia to China could face some unexpected changes, so Russia wants to be prepared.

The newly signed 38 billion cu m gas deal will supply gas from Russia's Kuvykin and Chayandin gas fields in eastern Siberia and be piped to the Beijing-Tianjin-Hebei metropolitan area in the north and the Yangtze River Delta in the east.

Sun Yongxiang, a professor at the Euro-Asian Social Development Research Institute of the State Council's Development Research Center, said the pipeline will go a long way toward easing China's gas shortage in recent years.

"However, it is still tough to evenly allocate natural gas to different regions and users," he said. "The energy resource should be delivered to most urgently needed areas for the best economic benefit."

Nevertheless, he said the government should also make sure residential users and industries get their fair share.

In 2013, China's natural gas consumption in urban areas grew 19.8 percent to 68.7 billion cu m, accounting for more than 40 percent of the country's total gas consumption, according to the institute.