Yuzhno-Sakhalinsk — China could import 100 Bcm of Russian gas, including natural gas and LNG, in 2020, or about one third of the country's total consumption, as it sees Russia as a strategic partner that would help it move to cleaner fuel away from coal, Zhen Wang, CNPC's deputy director-general, policy research, told journalists Wednesday.
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China has chosen gas as its next top growth fuel, as it is required to lower emissions by 2020 according to an agreement with the US. Gas is to make up 60% of China's energy portfolio by then, Wang said.
While China would prefer to diversify the suppliers, Wang said having Russia as the largest supplier would be safe.
"From the consumer side, we want to diversify gas supplies, it would be much safer. But I don't think [Russia being the largest supplier] is a real problem. China is big enough, and China's gas market is also big enough," he said on the sidelines of Sakhalin Oil and Gas conference in Russia's Far East.
Over the past two years, Russia's gas giant Gazprom and China National Petroleum Corporation or CNPC have signed two 30-year deals on total gas supplies of 68 Bcm to China from West Siberian fields, and a memorandum of understanding on potential 15 Bcm/year pipeline supplies from Russia's Far East.
The supplies under the first contract, Power of Siberia, are scheduled for 2018. The construction of the pipeline is underway.
Gazprom's deputy CEO Alexander Medvedev said in a presentation a day earlier that China may import 94 Bcm of gas in 2020, and push up the volumes to 131 Bcm in 2025.
CNPC's ETRI research institute's optimistic forecast sees China's total gas consumption at 334 Bcm in 2020, and 269 Bcm under the conservative scenario.
The forecast was revised down in May from around 300 Bcm of domestic demand under the conservative forecast earlier this year, he said.
Wang said he personally adheres to the optimistic forecast, and expects demand to be around 330 Bcm by 2020.
While China has seen a gas demand slowdown recently, and even if the current demand slowdown lasts, China's gas consumption will increase at a relatively high rate in the long term, Wang said.
"I don't think the parties should negotiate based on the current demand, they both should have a long horizon view. It should be based on the future," Wang said.
LNG, UPSTREAM PROJECTS
The long-term partnerships also involve cooperation on LNG projects and upstream crude projects.
China's Novatek signed a framework agreement to sell a 9.9% stake in its Yamal LNG project project in West Siberia to China's Silk Road Fund earlier this month.
Unlike natural gas, Russian LNG will face competition from Australia, the Middle East and Africa, all of which deliver LNG to China. But those deliveries are expensive, so CNPC is "interested in Russian LNG, which may have a geographical and political advantage in the future," Wang said.
"Russia and China are so close, and the Chinese government believes Russia would be a strategic partner, and I believe in the same thing in natural gas. Even if we can import from other countries, gas will play such an important role that Russian gas will be crucial to the Chinese gas future," he said.
China favors more cooperation between CNPC and the Russian side "in the whole chain; upstream, downstream, pipeline," he said, adding it welcomes Rosneft and Gazprom's investments in China.
Both state and private Chinese companies have already agreed to enter upstream projects in Russia. The latest deals include Rosneft's agreements with CNPC and Sinopec, and Gazprom Neft's MOU with CEFC.
Earlier Rosneft and CNPC signed a framework agreement on CNPC taking a 10% stake in Rosneft's Vankor project. While Rosneft has agreed on selling an equivalent stake to India's ONGC, talks with CNPC were continuing, Wang said, adding subsequent decisions will depend on both sides.
CNPC is interested in the project "if it is profitable," he said.
Rosneft also agreed with China's Sinopec on general conditions for joint development of the Siberian Russkoye and Yurubcheno-Tokhomskoye fields.
Gazprom's oil arm Gazprom Neft signed an MOU with CEFC China Energy Company for joint work on oil exploration in Russia's East Siberian blocks.