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Russia’s gas export center of gravity is shifting eastward

  After the Crimea crisis in March 2014, Western countries began to impose economic sanctions on Russia, coupled with factors such as the sharp drop in international oil prices, which brought the Russian economy into unprecedented difficulties. In May of the same year, China and Russia signed the “Memorandum on the Eastern Route Natural Gas Cooperation Project”, and China National Petroleum Corporation (“CNPC”) and Gazprom (“Gazprom”) signed the “China-Russia Eastern Route Gas Supply and Sales Contract”. , with a cumulative contract period of 30 years. Since then, the focus of Russia’s energy exports has shifted to East Asia. On December 2, 2019, the China-Russia eastern natural gas pipeline (the pipeline is called the “Power of Siberia” pipeline in Russia) was officially put into production and ventilation. The Ukrainian crisis broke out and escalated in February this year. The United States and the West imposed successive “ceiling” sanctions on Russia. Natural gas trade became the focus of the game between Russia and the European Union. In this context, the “Power of Siberia-2” pipeline project to supply natural gas to China via Mongolia, promoted by Russian President Vladimir Putin, has once again attracted attention.
Status and Prospects of Russia’s Natural Gas Exports

  Russia is rich in oil and gas resources, and its economic development is highly dependent on energy exports. According to statistics from the Russian Ministry of Economic Development, in 2021, Russia’s pipeline natural gas exports will be 205.6 billion cubic meters, and liquefied natural gas (LNG) exports will be 29.1 million tons (about 40.88 billion cubic meters). According to BP’s “World Energy Statistical Yearbook (2022)”, in 2021, Europe’s pipeline gas imports will be 232.8 billion cubic meters, and 167 billion cubic meters will be imported from Russia; LNG imports will be 108.2 billion cubic meters, and 21.6 billion will be imported from Russia. cubic meter. It can be seen that Russia’s natural gas exports to Europe account for nearly 80% of its total exports. After the escalation of the Ukraine crisis, Russia’s natural gas exports to Europe fell sharply. According to data released by an institution under the London Stock Exchange Group, from January to July this year, Russia’s natural gas exports to the EU and the UK through gas pipelines fell by nearly 40% compared with the same period of the previous year.
  According to statistics from my country’s National Development and Reform Commission, National Bureau of Statistics and General Administration of Customs, China’s natural gas imports in 2021 will be about 167.5 billion cubic meters, of which LNG imports will be about 108.9 billion cubic meters (accounting for 65% of total natural gas imports). , the pipeline gas import volume is about 58.6 billion cubic meters (accounting for 35%). Among them, the natural gas from the Sino-Russian East Line Pipeline is about 10 billion cubic meters. In 2021, Russia will rank sixth among China’s LNG suppliers. According to Russian media reports, the “Power of Siberia” pipeline is expected to reach an average annual designed gas transmission capacity of 38 billion cubic meters to China by 2025. On February 4, during Russian President Vladimir Putin’s visit to China, PetroChina and Gazprom signed the “Far East Gas Purchase and Sale Agreement”. According to the agreement, Russia’s pipeline natural gas supply to China is expected to increase from 38 billion cubic meters per year to 48 billion cubic meters per year. However, even if the “Power of Siberia” and “Power of Siberia-2” pipelines are fully loaded, Russia can only transport about 100 to 120 billion cubic meters of natural gas to China a year. People in the Russian energy industry pointed out that the focus of Russia’s natural gas exports has shifted to the Asia-Pacific, not only because Europe wants to reduce or even completely get rid of its dependence on Russian natural gas, but also because of the continuous growth of energy demand in Asia; Russia’s natural gas exports to Europe can be transferred to the Asia-Pacific, provided that it must be matched Construction of infrastructure such as gas pipelines and LNG plants.
Russia and Mongolia advance “Power of Siberia-2”

  The project of Russia’s natural gas pipeline to China transiting through Mongolia has a long history. In December 1999, the then Mongolian President Bagabandi visited Russia and reached an agreement in principle with the then Russian President Yeltsin on Russia’s construction of a natural gas pipeline to China via Mongolia. However, the relationship between Russia and Mongolia was not close at that time, and the project was only in the envisaged stage. Entering the 21st century, Russia adjusted its policy towards Mongolia, and the two countries established a strategic partnership in August 2009. However, due to the lack of mutual trust, the energy cooperation between the two countries has not achieved substantial breakthroughs. In May 2014, China and Russia reached a gas supply agreement and planned to build the China-Russia eastern natural gas pipeline. In September of the same year, Mongolian President Elbegdorj proposed to President Putin that the Sino-Russian natural gas pipeline would pass through Mongolia, but he did not receive a clear attitude from Russia. The first gas pipeline between China and Russia chose to enter China from Heihe City.

On September 16, 2021, Russian President Vladimir Putin and Mongolian President Khuri Sukh held talks at the Kremlin.

  In September 2019, President Putin instructed Gazprom to study the feasibility of sending natural gas to China via Mongolia. In December of the same year, Gazprom and the Mongolian government signed a memorandum of cooperation on the “Sino-Russian Natural Gas Pipeline Transiting Mongolia Project”, which Russia called “Power of Siberia-2”. This pipeline has made a breakthrough at this time. First, because the China-Russia eastern natural gas pipeline has been successfully implemented, it is time to put the China-Russia western natural gas pipeline on the agenda; second, in September, Russia and Mongolia established an “indefinite comprehensive strategy” partnership”, the cooperation between the two parties has become more mature. With the joint efforts of Russia and Mongolia, “Power of Siberia-2” completed the economic and technical feasibility study report from 2020 to 2021. In 2022, Russia and Mongolia will shift the focus of cooperation to consultation with China and solve financing problems.
  Russia expects that the “Power of Siberia-2” project will drive the economic development of its domestic regions along the route. After the completion of the pipeline, in addition to exporting more natural gas to China, Russia can also include Gazprom production along the pipeline and make it into the distribution network. According to Gazprom’s disclosure, the starting point of the “Power of Siberia-2” pipeline will be the Yamal Peninsula in the Arctic region – the Bovanekovo gas field and the Harasavi gas field. The two gas fields are also the bases for Russia’s gas supply to Europe. From here, the pipeline will pass through Okrasnoyarsk, Irkutsk, Buryatia and Transbaikal regions, enter Mongolia through Lake Baikal, pass through Ulaanbaatar, and is expected to enter from Erenhot China. According to the plan, the total length of the pipeline is about 2,594 kilometers. The construction cost and complexity are similar to the “Power of Siberia” pipeline, and the construction time will take at least six years.
  The “Power of Siberia-2” pipeline will promote the diversification of Russia’s natural gas sales market, while effectively hedging the risk of pipeline interruptions in Europe. Due to the accelerated energy transition in Europe and the confrontation between Russia and Europe, the demand for Gazprom in Europe will continue to decline. In contrast, natural gas consumption in Asia-Pacific countries such as China will become the main engine of global natural gas demand growth.
  In addition, the Russian side believes that the “Power of Siberia-2” pipeline will greatly shorten the transportation distance of Gazprom gas to China, making it easier for Gazprom companies to reach an agreement with the Chinese side, and with the reduction in the cost of natural gas transmission, the Chinese side may be willing to accept a slightly higher price. delivery price.
  Mongolia has been actively striving for the transit of the “Power of Siberia-2” pipeline. First, it is hoped that it can supply some natural gas to Mongolia to alleviate the problem of energy shortage in Mongolia, and at the same time promote Mongolia’s air governance and green development; second, it is expected to stabilize after the project is completed. Collect transit fees and increase domestic jobs for economic recovery.
  In general, Russia hopes to use the “Power of Siberia-2” pipeline to export Siberian natural gas to Northeast Asia, expand its influence on the Northeast Asian economic circle, and bind Russia and Mongolia to a deeper interest. At present, although Japan and South Korea have followed the United States and Europe in imposing multiple rounds of sanctions on Russia, both Japan and South Korea are countries that lack oil and gas and are highly dependent on oil and gas imports. In the long run, Japan and South Korea cannot get rid of their dependence on Russian natural gas.

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