China is 'Gazprom's new Europe' -Upstreamonline.

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China is 'Gazprom's new Europe'

Market maker: China deal to unlock huge market for Russian gas

Bill Lehane 22 May 2014 08:28 GMT

Gazproms long-term supply deal with China unlocks a

vast new market that could replicate the Russian gas
giants expansion in Europe at an even faster pace,
energy advisors WoodMacKenzie said.
The Russian gas giant and China National Petroleum Corporation
agreed on Wednesday for Gazprom to supply 38 billion cubic
metres per year of gas under a 30-year deal valued at more than
$400 billion.
Russia also committed $55 billion to developing upstream giant gas
projects in East Siberia and building the eastern Power of Siberia
pipeline across Siberia to Vladivostok near the Chinese border.

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Wood Mackenzie head of Asia gas research Gavin Thompson said

the deal had clear parallels with Gazproms Europe exports,
pointing out that north-east China and western Europe held similar
population sizes.

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Gazproms exports to Western Europe first reached 38 bcm by the mid-1980s and have
since increased to over 150 bcm into the whole of Europe. We anticipate overall gas
demand from China over the next two decades will grow more rapidly than that witnessed
Europe from the mid-1980s, Thompson said.
Wood Mackenzie global gas research analyst Stephen ORourke said the pact with CNPC
provided a vital new market for Gazprom at an uncertain time for its European gas demand
The agreement not only establishes a new gas production centre in East Siberia for
Gazprom but provides the company with pipe export growth and market diversity away from
its legacy European customers, ORourke said.
Chinas populous north-east experiences severe winters and has a shortage of indigenous
supply options as demand continues to rise to an expected 125 bcm by 2025,
Woodmackenzie said.
Without East Siberian gas, alternative supplies would have to be sourced requiring
significant additional infrastructure and cost. It would also deprive eastern coastal markets
of supply, forcing an increased reliance on imported liquefied natural gas, the energy
advisors said.
For Gazprom, the Power of Siberia pipeline will offer opportunities to pursue additional
export projects to more Asian buyers.
The deal could also open up the Chinese market for Russian independents if additional
volumes are needed while Gazproms east Siberian giant fields Chayandinskoye and
Kovytinskoye are still ramping up, the analysis said.
Field developments to serve the deal will be costly and technically challenging, Wood
Mackenzie added however, given the Chayandinskoye fields complex geology relative to
West Siberia and its helium-rich gas.
The overall cost for the Chayandinskoye upstream development, Power of Siberia pipeline
and processing costs could exceed US$40 billion. This makes it one of the largest oil and
gas investment decisions of the year globally, the energy advisors said.

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China is 'Gazprom's new Europe' -Upstreamonline.com

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23/5/2014