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Gazprom and CNPC sign historic natural gas deal worth USD 400bn

21st May 2014

China and Russia have signed the long-expected natural gas supply deal in a contract between CNPC and Gazprom worth USD 400bn

Gazprom and CNPC sign historic natural gas deal worth USD 400bn
The deal would mean Russia supplies China with a quarter of its domestic natural gas consumption, and will pull China away from dirtier coal-sourced power

Russia is to supply 38 billion cubic metres of gas a year to China for the duration of 30 years at a massive USD 400bn.

The deal includes the construction of a new eastern route gas pipeline to link Siberian gas fields to China’s industrial and urban coastal heartland.

The deal between the two national oil companies occurred during the state visit to Beijing of Russian president Vladimir Putin, and was signed at a ceremony witnessed by the heads of state of both nations.

“Russia and China have signed the biggest contract in the entire history of the USSR and Gazprom – over 1 trillion cubic meters of gas will be supplied during a whole contractual period. Russian gas will be sold at a brand new market with a huge potential," said Alexey Miller, Gazprom Chairman.

"The arrangement of Russian pipeline gas supplies is the biggest investment project on a global scale. USD 55 billion will be invested in the construction of production and transmission facilities in Russia. An extensive gas infrastructure network will be set up in Russia's East, which will drive the local economy forward. Great impetus will be given to entire economic sectors, namely metallurgy, pipe and machine building.

"Today we started the first page of a big book, a fascinating story of the Russian-Chinese cooperation in the gas industry, and many more essential chapters are yet to be written in it."

The deal would mean Russia supplies China with a quarter of its domestic natural gas consumption, and will pull China away from dirtier coal-sourced power.

Although this deal has been talked about for many years, many see the sudden agreement as a move by Russia to reduce dependency on a European market rocked by the recent crisis in Ukraine.

The eastern route stipulates the delivery of 38 billion cubic meters of natural gas from Russia to China via the Power of Siberia gas trunkline (unified gas transmission system encompassing the Yakutia and Irkutsk gas production centres designed for supplying natural gas to Russia's Far East and China). The bulk of pipes used in the construction will be domestically manufactured. Some 11,700 experts will be engaged within Phase 1 of the Power of Siberia project and some 3,000 employees will ensure the pipeline's operation.

CNPC is China's largest petroleum company wholly-owned by the state and is one of the world's leading integrated oil and gas production companies.

In 2009 Gazprom and CNPC inked the framework agreement on the major terms and conditions of natural gas supply from Russia to China. The agreement stipulates annual exports of up to 68 billion cubic meters of gas to the Chinese market. In 2010 the extended major terms of natural gas supply from Russia to China were signed.

In September 2013 Gazprom and CNPC inked the agreement on the major terms and conditions of pipeline gas supply from Russia to China via the eastern route.

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