Русская версия

( Translate with Google )

Main page > Conferences > Prospects of Russian gas export to China: political and economic aspects

Prospects of Russian gas export to China: political and economic aspects

Key topics of Konstantin Simonov's speech at The Fourth Sino-Russo-Kazakh Oil & Gas Forum.
Beijing, China, December 6, 2007.

(Read this speech's presentation in PDF PDF 289 KB)

China in gas trap

Production and consumption of gas in China
Source: BP

At first sight situation is comfortable: China produces more gas than consumes.

But …

The same situation was with oil and coal. And now China is increasing an import of this energy carriers.
The serious increasing of consumption: the production of gas will be behind consumption very soon.
Gas is difficult to substitute by coal also because of ecological aspect.
Difficult geological conditions of occurrence of natural gas causes the cooperation with Western companies. This process increases the political risks.
Shelf projects are also dangerous from political point of view especially in case of military operations.

How Much Gas will China consume?

International Energy Agency: China import of gas in 2020 will be 80-160 bcm.
Until 2010 it will be possible to solve the problem with a help of LNG –but import must not be more then 10-15 bcm and gas production must be on scheduled level).

Where to take Gas?

Gas production chart
Source: BP

LNG: the beginning of supply from Australia, Algeria, Nigeria and Oman. Soon we will see the supply from Malaysia and Indonesia. But the stake on LNG can be problematic.
In the case of war the LNG supply chains will be broken.
It’s possible to see the decline of gas production in Asia and Oceania.
Competition for gas with Japan and Korea.
Struggle for Turkmenistan – hope for 30 bcm from Amudariya is very optimistic. Situation with gas supply from Uzbekistan and Kazakhstan is even more uncertain.
Myanmar – serious political risks.

Gazprom is in Comfortable Position

Three factors in favour of Gazprom:

The serious increasing of dependence of EU on import of energy carrier (gas - 84% to 2030).
Very difficult situation with supply of gas to China from other regions.
The struggle for Central Asia will not be totally lost by Russia. China or EU can build pipelines from CAC - but there will no reserves to respond to the demand of both consumers. It means that if China solves the problem of gas supply with a help of CAC it will increase the «gas starvation» of EU.

Forecast of the Russia’s gas balance through 2015, bcm
	2007	2008	2009	2010	2011	2012	2013	2014	2015
Resources	776	793	810	832	856	884	924	957	976
Production	645	679	695	711	734	758	797	827	844
Including in the Far East	7	13	19	26	27	35	39	41	44
Gazprom	561	567	569	570	572	582	594	615	620
Others	102	112	126	140	162	176	203	212	224
Gas from Central Asia	62	63	63	68	68	70	70	70	70
Intake from underground storages	50	50	51	52	53	54	55	58	61
Distribution	776	793	810	832	856	884	924	957	976
Domestic market	415	422	431	437	445	454	461	469	476
Including in the Far East	7	9	11	13	14	17	18	20	21
Gazprom’s technological needs	53	54	54	55	55	56	57	57	57
Export	257	267	274	283	299	315	346	368	376

Source: Gazprom

Where is free gas for China?

Forecast of Production and Exprot of gas from Far East and Eastern Sibirea in 2030 according to East-50 Scenario

Production in Russian East - 120,8 bcm to 2030
Export - 77,6bcm

A Lot of Variants …

East Siberia and Sakhalin energy map by 2030
Source: Vedomosti

…and a Lot of Problems

Kovykta – not for China. From China point of view it will be the best solution – cheap extraction and increasing reserves (only in 2007 the increasing on C1 was 173,3 bcm).
According to East Gas Program the extraction of gas on Kovykta will start in 2017.
Kovykta is the trump of Gazprom and it can use it in relations with EU.

The Problem of Choice

There are no plans to organize gas export from Krasnoyarsk Region.
Yakutiya – the question of price.
Sakhalin is for Japan and Korea.Most reliable is the scenario of integration of Sakhalin-1 and Sakhalin-2 projects to one LNG export center for Japan, Korea and the USA in future.
Main question is choice between East and West. It’s not only the choice of gas export model. It’s a choice of geopolitical ally.

Thank you!

Special report:

Nord Stream 2 and Ukraine: Costs Should Decide

There has been much discussion about how Russia – Europe’s biggest gas supplier – can continue to supply gas to Europe over the coming decades in the most secure and cost efficient way. Gazprom and its European partners have decided that building two additional pipelines through the Baltic Sea (Nord Stream 2) is the best commercial solution to secure future gas supplies for the EU, where gas production continues to decline and demand is expected to grow.

Shale Revolution: Myths and Realities

The boom in shale gas production in the US and its wide-ranging influence on markets rocked the gas world. Liquefied gas deliveries were redirected, altering the already fragile balance of demand and supply in traditional markets for pipeline gas in Europe.

Liquefied Natural Gas Outlook: Expectations and Reality

World market has shown interest to liquefied gas. Russia has so far been aside of it. However, producers have announced several large LNG projects. The new study will help investigate this delicate subject and understand what is in store for LNG production and export in the nearest years.

Analytical series “The Fuel and Energy Complex of Russia”:

State regulation of the oil and gas sector in 2023, 2024 outlook

The year 2023 posed a serious challenge to the Russian oil and gas sector that was subjected to extremely tough sanctions that could have led to collapse in exports of crude oil and petroleum products. The oil industry and corresponding regulatory mechanisms were tested throughout the year. The state, being in dire need of financial resources, had to save the chicken that lays golden eggs. How well is it coping with this task?

Gazprom in the period of expulsion from the European market. Possible evolution of the Russian gas market amid impediments to exports

The year 2023 saw an even larger drop in Russian exports of pipeline gas to Europe. In the past two years, Gazprom failed to export some 120 bcm of natural gas, and these quantities are now locked up in Russia. Another difficult case concerns extension of the current gas transit contract with Ukraine, which expires at the end of 2024. Gazprom is already looking for new opportunities.

New Logistics of Russian Oil Business

When the G7 and the EU as of 5 December 2022 imposed an embargo on oil from Russia and the price cap mechanism that was later complemented with the same measures against petroleum products, Western analysts confidently predicted inevitable collapse in Russian exports by at least one-third. The new report explains in detail how the mechanism of Russian oil transport and sales works and whether Western companies remain in this business.

Russia’s New Energy Strategy: on Paper and in Fact

The Energy Strategy to 2050 was originally supposed to be approved before 15 September 2022, yet it was never adopted even as of November 2023. Moreover, not even a draft of the ES 2050 has been published yet. On the one hand, this vividly demonstrates the attitude to strategic documents on energy. It turns out that the industry on the whole copes with the unprecedented pressure of sanctions even without official strategies. On the other hand, Russian oil and gas has been facing really serious challenges that cannot be taken lightly. And immediate problems are a reflection of long-term threats too.

Outlook for Russian LNG Industry

European sanctions and Brussels’ policy of abandoning Russian energy resources plus the destroyed Baltic gas pipelines have shut in Russia a respectable volume of pipeline gas that cannot promptly be sent to alternative markets. This would seem a strong argument in favour of developing LNG production in Russia. The new NESF report must give the answer to the question about what part of the plans for dramatic increase in LNG production in Russia can be considered realistic.

Russian Energy and West One Year after Ukraine Conflict Began: Are There Connections Still?

Global politics are the framework for energy relations. However, energy projects are developed and deals are made immediately at the corporate level. It is companies that form the threads that tie nations in the energy business. It is therefore important to analyse relations between Russian and Western corporations. As long as companies from the “collective West” stay in Russia, there are still options for continuing co-operation. The latter still brings Russia fiscal revenue and markets.

Green Agenda in Russia during Bitter Conflict with West

After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.

Oil and Gas Sector Regulation in 2022 and Prospects for 2023

The year 2022 was very tough for the Russian oil and gas industry. After February 24, the industry was subjected to the most severe sanctions. However, their influence was quite different. Nevertheless, the industry is entering the year 2023 with anxiety. The EU intends to continue to reduce purchases of Russian gas, which will inevitably affect Russian revenues. The launch of new LNG plants is in question due to technological sanctions. Another question is about the green agenda. Thus, it is a big question whether it is reasonable to keep insisting on accelerated energy transition in Russia.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

Rambler's Top100

About us | Products | Comments | Services | Books | Conferences | Our clients | Price list | Site map | Contacts

Consulting services, political risks assessment on the Fuel & Energy Industry, concern of pilitical and economic Elite within the Oil-and-Gas sector.
National Energy Security Fund © 2007