Why is China hesitating to build a new gas pipeline from Russia

Alexey Gromov, Principal Director on Energy studies of the Institute for Energy and Finance, commented to the business newspaper Vzglyad on the lack of progress in negotiations between Russia and China on the new Power of Siberia-2 gas pipeline.

"China receives our gas through the Power of Siberia gas pipeline on very favorable price terms. This is probably the cheapest source of pipeline gas to China at the moment, and it was the same in 2023. According to our estimates, as the results of last year, gas from the Power of Siberia was sold on average at a price below $ 300 per thousand cubic meters. It was cheaper, than to supply China with the same Central Asian pipeline gas, which was priced at 350-370 dollars per thousand cubic meters.

Therefore, China had a request to Gazprom's management to maximize gas pumping through the Power of Siberia gas pipeline as much as possible, as far as technical capability allows," Alexey Gromov explains.

The Power of Siberia – 2, unlike the Power of Siberia, is not such a strong priority for China for several reasons. The Power of Siberia and the Far Eastern Route enter the northeastern part of China, which has historically been the most poorly gasified - and there is no alternative to Russian pipeline supplies here. Whereas from the "Power of Siberia – 2" gas will come along approximately the same route as Central Asian gas, and not to new regions, but to the same Shanghai. That is, Russian gas competes with other gas here. To kill competition with Central Asian gas, Russia needs to sell gas at ridiculous prices. But Russia can hardly do this, because it is important for us not only to increase supplies to China, but also to get benefits for the budget," the expert argues.

"China does not just buy Central Asian gas at the border, it also participates in projects for its production in these countries, for example, in Turkmenistan. Moreover, the pipeline system was built with Chinese loan money, so China still receives loan payments from Central Asian countries, and partly not with money, but with gas. In the Russian project, we are talking only about the gas purchase and sale," Alexey Gromov says.