China’s Gezhouba Signs Russia Deal; Adds to Recent Spike in International Energy Projects

China Gezhouba Group signed a contract on July 5 with SC Nipigaz, a subsidiary of Russian gas company Sibur Holdings, for the construction and installation of cryogenic gas separation plants at the Amur Gas Processing Plant, a joint project between China Petroleum Engineering Construction Corporation and Gazprom that will be the largest in Russia and one of the biggest in the world.  The project will be located in the Russian Far East’s Amur Oblast, which borders China’s Heilongjiang Province.

The project represents Gezhouba’s latest foray into foreign energy construction projects.  In May 2016, Gezhouba signed an MoU with Bosnian state power company Elektroprivreda BiH to build a $900 million reactor at Tuzla Thermal Power Plant.  This was followed in November 2016 by the signing of a framework deal between the two parties (facilitated by a loan from China’s ExIm Bank that would cover 85% of the projects financing requirements) that is still pending a guarantee from the often slow-moving Bosnian government.

In June 2017, Gezhouba was also awarded a contract to build the Budhi Gandaki Hydro Project in Nepal.  The deal was strongly opposed by the opposition Naya Shakti Party-Nepal, which claimed that Gezhouba was ill-suited for the project’s demands.  The contract, however, was approved by the Nepali cabinet after then-Prime Minister Pushpa Kamal Dahal was told by Chinese officials during a March 2017 visit to Beijing that it would be well-received if a Chinese company was awarded the contract.  It remains to be seen whether Dahal’s departure from office in May will destabilize the deal.

With the Amur deal, Gezhouba is further expanding its global presence in energy development.  A project perceived as successful in Russia could be seen as a useful way of revamping the company’s reputation, which, in its recent global exploits, has found itself challenged in various ways, including with regard to domestic politics and finalizing financing agreements.