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Russia’s $400 Billion Pipeline Project Launches Today

The presidents of Russia and China will today officially inaugurate the Power of Siberia natural gas pipeline that will eventually deliver 38 billion cubic meters annually to China, with the full capacity to be reached some time in 2025.

The deal for the pipeline was signed between Gazprom and CNPC back in 2014 for a period of 30 years, which makes it worth around $400 billion. Construction began later that same year. Costs were calculated at $12 billion for the construction works and another $6.7 billion for the development of the fields that the gas will come from.

Russia has the largest natural gas reserves in the world while China will likely this year become the largest importer of the fuel. According to the International Energy Agency’s Gas 2019 report, the country will account for 40 percent of global natural gas demand growth between now and 2024 as it seeks to reduce its dependence on coal for energy.

Russia is the obvious choice, although China is also betting big on LNG to diversify its sources of energy. The two neighbors have been forging closer relations in the past two decades amid a growing alienation for both Europe and the United States, and the Power of Siberia project is equally important for Russia and China.

For Russia, it will open up a huge new market to supplement and eventually maybe even overtake its key European market. For China, it will ensure a steady supply of natural gas amid fast-growing demand, and help it to avoid the shortages some northern provinces suffered two years ago due to lack of supply and distribution infrastructure.

Meanwhile, Gazprom is working on finalizing another two priority gas pipeline projects. Nord Stream 2 will double the amount of natural gas that Russia sells to Germany and that doesn’t go through Ukraine. TurkStream will supply gas to Turkey, beginning in January 2020.

By Irina Slav for Oilprice.com

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