Sino-Russian expert wars: natural gas buyers and sellers choose

International Energy News: On August 17th, Chinese and Russian experts discussed the prospects for energy cooperation between China and Russia through a video connection in the Russian News Agency. The Sino-Russian gas agreement has not yet been finalized due to price reasons. The Chinese experts have appealed that Russia should Seize this huge opportunity in the Chinese market and "sincerely cultivate the market together."

On the 17th, Tatianana Mitrova, a researcher at the Russian Academy of Social Sciences’ Energy Institute, said that in terms of government policies, Russia attaches great importance to exporting natural gas to the east; negotiating export prices in business is also very important to China. Now that natural gas is linked to crude oil prices and the price of oil continues to rise, it is important to determine how to determine export prices and the large amount of infrastructure needed for natural gas extraction.

Igor Thomp, head of the Department of Energy and Transportation at the Institute of Oriental Studies at the Russian Academy of Social Sciences, emphasized at the meeting that since China and Russia have a strategic cooperation relationship, why can we not solve the outstanding price issue between China and Russia from a strategic perspective? He proposed that China and Russia as buyers and sellers, the price difference between the two sides proposed 100 US dollars, before considering the spread, "should consider the significance of Sino-Russian strategic cooperation." He believes that China's domestic natural gas market is not yet mature, and does not meet Russia's usual views on the natural gas market. "Since the Russian Gas Group has spent a lot of expenses on infrastructure construction, why can't China go to build these infrastructure?" After the question was raised, Tonberg also confidently emphasized that Russia has "a considerable amount" of natural gas available to China.

Sun Yongxiang, a research fellow of the Institute for Social Development of the Eurasian Institute for Development Studies at the State Council, affirmed the views of Russian experts. He explained that the so-called strategy refers to "big idea, big plan", Russia has a strategic plan for energy development in the future, and China also has "diversification." He said: “China has other markets besides Russia, including importing liquefied gas from the Middle East and natural gas from Central Asia. If we look at the strategic agreement, where is China’s (buyer’s) market, where is it cheaper? It’s not necessary. This is a clear matter for your (natural) gas in Russia. Therefore, the key to achieving energy cooperation between China and Russia is to achieve agreement on a strategic basis, which is beneficial to both parties."

Pang Changwei, a researcher at the China National Petroleum University’s Energy Strategy Research Center, also emphasized at the meeting that China and Russia should sincerely cultivate the market together and pointed out that China “is indeed also promoting the diversification of natural gas imports”. He said: "Some people at the CNPC (China National Petroleum Corporation) said, and hope that Russia will soon enter the Chinese market, otherwise you will lose this market."

Sino-Russian failed to reach an agreement on natural gas in the end, and the price is not the key. Mitrova said, “We cannot allow China to buy Russia’s natural gas at prices it deems unreasonable. Now, China’s energy is mainly coal, but from the perspective of China’s economic growth rate and the increase in demand for electricity, Look, sooner or later, China will face the current situation that the amount of coal no longer meets the demand of China's electricity. Therefore, no matter where the import of natural gas, Russia or Australia, Ye Hao, China will certainly increase the weight of natural gas demand."

Mitrova emphasized that China can purchase natural gas from Myanmar and Central Asia, including liquefied gas. China can indeed have many options, but "Russia as a seller also has many options," she cited for example, due to the March earthquake causing nuclear power plants. In Japan, the hunger for liquefied gas has increased, and Russia’s liquefied gas is more competitive than Australia’s. “These are opportunities for Russia.”

Pang Changwei emphasized at the meeting that the difficulty China faces is that if the price of natural gas is raised above that of coal, it is not conducive to reducing the demand for coal. At the same time, it will also affect Chinese companies going abroad to purchase natural gas and develop natural gas resources, and provide natural gas resources to China.

According to the Russian Ministry of Information, the asking price of Gazprom for China has been reduced to US$250 per cubic metre, which is US$100 lower than the previous quote of US$350-380 per cubic metre. This price is basically close to the price of China's natural gas imports from Kazakhstan and Turkmenistan. However, this quotation does not include the transportation costs of natural gas from Siberian origin to China.