What is known about the agreements between Russia and China on the Power of Siberia 2 project

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to the Vedomosti business newspaper on the signing of a Russian-Chinese legally binding memorandum on the construction of the Power of Siberia-2 gas pipeline.

The fact that the parties have committed themselves to the construction of the pipeline is a breakthrough in itself, says Alexey Gromov. The conclusion of the contract will be an even greater success for Gazprom, which needs to monetize the gas reserves of Western Siberia, the expert notes. He expects that the contract for the project will be concluded by the end of this year.

At the same time, the parties have yet to reach a compromise in terms of prices for gas supplies through the new pipeline, Gromov continues. China initially insisted on the cost of supplies for the Power of Siberia-2 at the level of domestic prices in Russia – taking into account plans to raise tariffs, this is $ 120-130 per 1,000 cubic meters, he recalls. Russia, in turn, wanted to supply gas via the Power of Siberia-2 on the same terms as the Power of Siberia 1, that is, with the price linked to the cost of the Asian oil product basket (now it is about $265-285).

The Power of Siberia-1 was built for five years, including the preparation of the resource base – the Chayandinsky and Kovyktinskoye fields, the expert notes. The resource base for the Power of Siberia 2 (Western Siberia) is ready, so construction will take about three years, he believes. Although much will depend on the speed at which China will build, Gromov clarifies.