(EnergyAsia, September 3 2014, Wednesday) — Russia has started construction of the world’s largest natural gas pipeline to deliver an estimated US$400 billion worth of the fuel to China over 30 years from early 2019.
Russian President Vladimir Putin and Chinese Vice Premier Zhang Gaoli jointly launched the construction of the 3,978-km pipeline on Russian soil at a ceremony held outside Yakutsk city in the Russian Republic of Yakutia. China will begin construction of its portion of the pipeline in the first half of next year.
The Russian leader said the US$70 billion project will “significantly strengthen” his country’s economic ties with countries in the Asia-Pacific region, in particular with “our key partner China.”
In May, Russia’s Gazprom and China National Petroleum Corp (CNPC) signed an agreement for the annual delivery of 38 billion cubic metres of natural gas from eastern Siberia that could meet around 8% of China’s projected demand of 400 bcm to 420 bcm by 2020.
The deal is expected to help the two countries achieve their goal of boosting bilateral trade flows from US$90 billion last year to US$200 billion by 2023.
According to Gazprom, the Power of Siberia pipeline will begin tapping gas from the new giant Chayanda field from 2018 with first delivery to China due in early 2019. The pipeline, which will also cover producing fields in Yakustsk and Irkustsk, can deliver up 61 bcm of natural gas a year to markets in northern China and the Pacific coast.
Expected to start production next year, Chayanda in Yakutia holds an estimated reserves of 1.2 trillion cubic metres of gas and 700 million barrels of liquid hydrocarbons. It could produce as much as 25 bcm of natural a year and 30,000 b/d of light crude.
Adding to the occasion, Putin said he welcomes a proposal by Russia’s largest oil producer, Rosneft, to admit China’s participation in the Vankor fields in eastern Siberia’s Krasnoyarsk region. Vankor, which holds estimated reserves of 520 million metric tons of oil and 95 bcm of natural gas, has been in production since 2009.
“We generally take a very careful approach to the approval of our foreign partners, but of course, for our Chinese friends there are no restrictions,” Putin was reported to have said.
With its relations with the West in free fall, Russia is desperate to increase trade and investment ties with Asia as it seeks to reduce dependence on Europe’s markets. Europe will continue to be the main buyer of Russian gas, with imports exceeding 161 bcm last year.