Power of Siberia 2: Russia to Keep Subsidizing Gas to China at a Loss
russiapost.info
Gazprom has recently reported progress in talks with China on the Power of Siberia 2 pipeline. Oil and gas market expert Mikhail Krutikhin argues that the colossal costs of building it will have to be swallowed so Gazprom can fulfill its obligations on the first Power of Siberia contract and that the project will never break even.

cross-posted from: https://lemmy.sdf.org/post/42066325

The consolidation of the Russia–China energy partnership underscores Moscow’s strategic pivot to Asia in the face of Western isolation, while giving Beijing greater leverage over its northern neighbor.

Gazprom CEO Alexei Miller announced that the company had signed a memorandum with China National Petroleum Corporation and Mongolian officials on constructing the Power of Siberia 2 export pipeline through Mongolia. He described the document as “legally binding.”

[…]

The memorandum does not specify financing. Based on the experience of the first Power of Siberia – it was launched in 2014 amid fanfare and claims that China would contribute $20-25 billion, but was ultimately financed by Gazprom alone – the burden will again fall on the Russian side. China will pay only for infrastructure on its own territory.

[…]

Beijing is demanding Russian domestic prices. Miller said the commercial terms would be announced separately. But it is possible that Gazprom has been forced to make concessions to secure Beijing’s consent to the project, since Putin effectively closed off the European market for the company.

Recall that gas supplied under the first Power of Siberia contract is priced not at the $400 per 1,000 cubic meters touted back in 2014, but at just over $200 per 1,000 cubic meters.

Amid the immense costs involved in gas infrastructure and field exploitation, Russia looks set to continue its policy of effectively subsidizing Chinese gas consumers – at a loss.