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.