Putin welcomes Chinese oil and gas deals amid tensions with Europe Oil and gas news

Russia agrees to supply gas to China via a new pipeline, as tensions with European customers are simmering over Ukraine.

President Vladimir Putin has unveiled new Russian oil and gas deals with China worth about $ 117.5 billion, promising to boost Russia’s exports to the Far East amid heightened tensions with European customers over the Ukraine crisis.

Russia, already Beijing’s third-largest gas supplier, is boosting ties with China, the world’s largest energy consumer, reducing its dependence on its traditional European energy customers.

“Our oil companies have prepared very good new solutions for the supply of hydrocarbons to the People’s Republic of China,” Putin said at a meeting with Chinese President Xi Jinping to discuss closer co-operation.

“And a step forward has been made in the gas industry,” he added, referring to a new contract to supply 10 billion cubic meters (bcm) a year to China from Russia’s Far East. Putin was in Beijing to attend the Winter Olympics.

Kremlin spokesman Dmitry Peskov said the deal was in 25 years, while a source in Chinese industry said it was in 30.

Russian President Vladimir Putin is attending a meeting with Chinese President Xi Jinping in BeijingRussian President Vladimir Putin attended a meeting with Chinese President Xi Jinping in Beijing, China [Sputnik/Aleksey Druzhinin/Kremlin via Reuters]

The power of Siberia

Russia is already sending gas to China through its Power of Siberia pipeline, which began delivering supplies in 2019, and through the supply of liquefied natural gas (LNG). It exported 16.5 billion cubic meters (bcm) of gas to China in 2021.

The Power of Siberia network is not connected to pipelines that send gas to Europe, which is facing rising gas prices due to limited supplies, one of several points of tension with Moscow.

According to earlier plans, Russia aimed to supply China with 38 billion cubic meters of gas by pipeline by 2025.

Separately, Russian oil giant Rosneft, led by Putin’s longtime ally Igor Sechin, signed an agreement with China’s CNPC to supply 100m tonnes of oil through Kazakhstan over 10 years, effectively extending the existing deal.

Rosneft said the new deal was worth $ 80 billion.

The agreements supported the ruble and the Russian stock market, including shares in Rosneft and Gazprom.

Putin has accused the United States of fueling tensions over Russia’s neighbor Ukraine, which has angered Moscow with its desire to join NATO. More than 100,000 Russian troops have gathered near the border with Ukraine. Western countries have accused Moscow of planning an invasion, which it denies.

Russia is Europe’s largest supplier of natural gas, and Western countries are worried that already strained supplies could be cut off in the event of a conflict.

However, the new deal with Beijing will not allow Moscow to divert gas that is otherwise destined for Europe, as it includes gas from the Pacific island of Sakhalin, which is not connected to Russia’s European pipeline network.

Gazprom said in a statement that it plans to increase gas exports to China to 48 billion cubic meters a year, including through a recently contracted pipeline that will deliver 10 billion cubic meters a year from Russia’s Far East.

According to its previous plans, Russia aimed to deliver 38 billion cubic meters to China by 2025. The statement did not specify when the new target of 48 billion m3 will be reached.

Gazprom, with foreign partners, including Shell, already produces more than 10 million tonnes of liquefied natural gas (LNG) a year in Sakhalin.

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