In 2014, Russia’s energy giant, Gazprom, struck a $400 billion deal with the China National Petroleum Corp. (CNPC) to supply it with 38 billion cubic meters (bcm) of gas annually for 30 years to fulfill its growing energy appetite. The energy giant will begin supplying gas through a 1,800 miles conduit known as Power of Siberia on December, 2.
China’s President Xi Jinping and Russian President Vladimir Putin will be part of the launch. Vladimir’s spokesperson claimed that a deal was struck between both the countries, through multiple negotiations, to build “the world’s biggest construction project”. The Chinese Vice Foreign Minister, Le Yucheng, said that “Power of Siberia” will allow both the nations “to complement each other’s strengths and pursue common rejuvenation”.
Gazprom is the world’s largest natural gas exporter, while the deal with China is the biggest Russia’s contract encountered till now. The pipeline extends from Chayanda and Kovykta gas fields in the coldest part of Siberia to Blagoveshchensk, near the Chinese border. According to Bloomberg, Russia may extend the pipeline toward the West from the Siberian fields.
It’s an important deal for Russia, as a deteriorating relationship with Europe over Ukraine transit fees, has resulted in the impositions of sanctions from Europe. Therefore, to strengthen its position in the gas market, it has struck an iconic deal with China. In addition to the 1,800 miles conduit, Russia has two more gas pipelines that will ramp up its supplies in Europe.
Nord Stream-2, with an annual capacity of 55 bcm, will double its gas supplies to Germany and is expected to go online by mid-2020. Another gas pipeline named Turkstream, extending over the 917 km pipeline, will bypass the Black Sea and be operational from January 2020.
Denmark’s approval of Nord Stream-2 has agitated the United States, Ukraine, and other North-eastern countries. The United States, in particular, fears that the pipeline will reduce its share of gas supply in the lucrative European market, while Ukraine will lose its Russia gas transit fees, which earns the country over $3 billion.