Gazpron, a Russian company has signed a 30 year gas contract with China National Petroleum Corp, CNPC. The two companies have already enjoyed a 10 year contract. Alex Miller, CEO of Gazpron and Zhou Jiping, Chairman of CNPC fronted the signing of this deal in a summit convoked in Shanghai.
Even though no official communication has been given on the value of the contract, it is however estimated to be valued over $400 billion. Russia President, Vladimir Putin, who witnessed the signing of this deal, confirmed that the price was satisfactory to both countries.
It should be noted that Russia is worried of the likelihood of facing European sanction over the Ukrainian crisis. For this reason, it has been enthusiastic about finding an alternative energy market for its gas.
Contribution to China’s burgeoning economy
Over the last 10 years, the two countries could not agree fully on the value of the deal. China is thought to have been drilling hard on the contract. Perhaps the contributing factors to the contract’s stalemate could be due to the fact that China had also found other gas suppliers such as Myanmar and Turkmenistan.
With the signing of this deal, over 38 billion m3 of gas is expected to be delivered yearly to china starting probably in 2018. This will contribute heavily to the growing China’s economy.
Putin was committed to the signing of the deal
Considering that the deal was signed at 04.00 china time, it implies that president Putin was committed to see that this deal was a success. With his level of commitment and sense of urgency, he ensured that the deal was signed to the satisfaction of the two contracting parties. The successful signing of the deal obviously opens doors of economic opportunities for both countries to benefit from in the near future.
Even though china needs gas energy to aid in addressing its smog levels as caused by coal, still, it needs to diversify on the suppliers. Perhaps, it is for this reason that it enjoyed dilly dallying in signing this 30 year gas deal with Russia. Obviously, Russia was not enjoying this delay.
The financial details of the detail are not in the public domain. They are as secretive as the motive of the deal. Even with the secrecy, it appears that Russia needed the deal to succeed to be able to stand in defense against the looming European sanctions. Besides, Russia will obviously benefit from China’s investment plans in Russia transport and power infrastructure.
Siberian power stuck out during the discussions of the deal
The construction of pipelines to china was one other point that stuck out during the discussion of the deal. However, more in importance was the financing of this $30 billion project. This discussion underlines the power of Siberia. The Power of Siberia, whose construction started back in 2007, is the only complete pipeline currently running to china from the Far East Russia.
Interestingly, china is Russia’s main trading partner. The bilateral trade flows between the two countries amounted to about $90 billion last year.