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Gazprom offers field swap with China to aid gas talks

08th June 2012

Russia has for years been engaged in painstaking talks with energy-hungry China over gas supplies, as Moscow tries to diversify its markets away from Europe, where it covers around a quarter of gas needs.

Russia is aiming to supply China with 68 billion cubic metres of gas a year starting from 2015

Gazprom has proposed swapping production assets with China under a long-term deal to ship Russian gas to the world's fastest-growing energy consumer, which has been stalled over disagreements on price, Russia's energy minister said on Thursday.

"Gazprom offered to let the Chinese participate in the development of fields on Russian territory on the condition that Gazprom could participate in the development of fields on Chinese territory," Energy Minister Alexander Novak told Reuters on Thursday, in his first remarks to international media after his appointment to the government last month.

Novak said asset swaps should be considered in the price of Russian gas shipments to China. He was part of a delegation to China headed by Russian President Vladimir Putin.

Russia is aiming to supply China with 68 billion cubic metres of gas a year starting from 2015 - almost a half of Gazprom's supply to Europe - as Beijing is tries to secure more sources of gas supply, including from Turkmenistan, as gas demand in the world's top energy consumer is expected to quadruple by 2030.

The exports could be split with 30 bcm per year coming from Gazprom's existing western Siberian fields and, possibly later, a further 38 bcm per year from its far east.

In addition to two pipeline routes previously under discussion - a western route from producing fields on the Arctic Yamal peninsula and an eastern route which could carry potential output from new east Siberian fields - China could buy liquefied natural gas from a new plant, he said.

"We are looking at the western route, eastern route and construction of an LNG plant on the territory of (the Pacific coast city of) Vladivostok for long-term contract deliveries to China," Novak said.

"What the final option will be is not yet clear," he said, adding that Russia and China have yet to come to an agreement over gas prices.

Gazprom planned to build the plant in partnership with a consortium of Japanese companies with a view to produce around 10 million tonnes of the frozen gas a year starting from 2016. Gazprom officials have recently said the plant annual capacity could be increased to 25 million tonnes.