China Begins Work on the Last Section of the China-Russia-East-Route Natural Gas Pipeline, Designed to Bring Russian Natural Gas to Shanghai

On January 6, reports emerged that construction commenced on the last three sections of the 5,111-kilometer, China-Russia-East-Route Natural Gas pipeline. Developed by China Oil & Gas Pipeline Network Corporation, the pipeline is the Chinese extension of Gazprom’s Power of Siberia pipeline network that, once completed, will bring an overall supply of 38 billion cubic meters of gas to China.  This would nearly quadruple current annual Russian exports to China via the same network.

The Power of Siberia pipeline, which became operational in December 2019, represents the energy component of the emerging and multifaceted strategic alliance between Moscow and Beijing.  For Russia, it will offer a useful alternative to its current export dependency on European markets, where, despite its market dominance, the company has been met with increasing competition and consistent pushback against its monopolistic maneuvers.  For China, a net importer of gas, the pipeline offers energy security for its rapid industrialization, particularly in the country’s northern provinces. Still, Beijing has appeared to maintain the upper hand in this aspect of the bilateral dynamic.  The power of Siberia competes with two other cross-border gas pipelines servicing China, which has given Beijing bargaining power against Gazprom.

The power of Siberia has already begun to transport limited capacities of gas from Russia to China under the $400 billion supply deal signed by Gazprom and China National Petroleum in 2014, which requires the Russian firm to deliver approximately 1 trillion cubic meters of gas to China over 30 years.  Continued pipeline development, such as this, however, will increase the capacity and reach of this project.

Gazprom has also begun to lay the groundwork for Power of Siberia 2 – a separate branch of the gas transmission network that would bring 50 bcm of gas to southern China via Mongolia.  In October 2020, Gazprom also opened tenders to explore the Kovykta gas field in eastern Siberia, reserves from which it plans to connect it to the Chinese pipeline by the end of 2023.