Gas deal supplies energy diversification

Energy specialists see China's new deal to import natural gas from Russia as a costly but necessary step toward energy diversification.

On Wednesday, President Xi Jinping and his Russian counterpart Vladimir Putin oversaw the conclusion of the decade-long negotiations over Russia's gas supply to China.

Under the roughly $400 billion pact, Gazprom will supply China with 38 billion cubic meters of gas annually for 30 years, starting in 2018, through the planned "eastern pipeline", which will connect Russia to China's northeastern Heilongjiang province, and from there connect with the industrialized cities along China's eastern coast.

Sun Yongxiang, a professor at the Euro-Asian Social Development Research Institute of the State Council's Development Research Center, said the strategic partnership between China and Russia has to be based on big-ticket deals.

The signing of the gas deal shows Russia's strong interest in diversifying its energy buyers outside Europe and China's interest in diversifying its energy supply structure, Sun said.

Russia, which exported around 160 billion cubic meters of gas to Europe last year, is under pressure to seek new energy buyers due to its growing friction with the West over Ukraine.

Wang Xiaokun, an analyst at the domestic commodities consultancy Sublime China Information, said the new supply from Russia will increase the share of natural gas in China's energy consumption mix from the current less than 6 percent to 8 percent.

Industry specialists speculate that the price could be about $300 per 1,000 cubic meters, close to Russia's export price to Europe but higher than China's gas imports from Central Asia.

Under the pact, Gazprom will be responsible for upstream exploration, gas processing and pipeline construction inside Russia, and its Chinese partner CNPC will build pipelines inside China and all supporting and storage facilities.

China, the third-largest natural gas consumer in the world, used up to 168 billion cubic meters of natural gas in 2013, an annual increase of 13.9 percent. But it depends on other countries for 30 percent of its supply.