Chinese work on 'Power of Siberia' gas pipeline flares into action

By bne IntelliNews June 29, 2015

bne IntelliNews -

 

Construction of the Chinese section of Gazprom's $21bn, almost 4,000km 'Power of Siberia' gas pipeline was launched in a shower of sparks on June 29, further marking the eastward pivoting of Moscow's energy exports amid tensions with the West over Ukraine. 

Russian Prime Minister Dmitry Medvedev applauded the start of the work at a video link-up with Gazprom and Chinese officials in the city of Heihe in China's northern Heilongjiang province as welders connected the first joint of that section of the pipeline.

"This project is possible because of the highest level of partnership between Russia and China, a partnership that is strategic," Medvedev said in comments published on the government website. In turn, Zhang Gaoli, China's first Vice Prime Minister, hailed the pipeline as the largest joint construction project to date, saying it "symbolises the full launch of the construction of a continental energy corridor linking Russia and China".

Construction of the Russian part of the pipeline began on September 1, 2014, in the eastern Siberian republic of Yakutia (Sakha). Gazprom says it plans to build 50 km of the gas line by the end of 2015. With an eventual annual capacity of 61bn cubic metres of natural, the route is due to come online in 2018. 

"I have no doubts that all the participants in the project, including Gazprom, will complete their obligations in full and on schedule," Medvedev said. The deputy chairman of Gazprom's board, Aleksander Medvedev (no relation), said earlier the Chinese partners wanted to shorten the completion period if possible, within the 2018 parameter.

Running through remote mountains and marsh regions, the 3968km Power of Siberia line will transport gas from Russia production facilities in Yakutia and the Irkutsk region of Eastern Siberia to consumers in China. 

In May 2014, as Russia came under increasing US and EU pressure over its actions in Ukraine, Gazprom and China's CNPC signed a $400bn 30-year contract to supply at least 38bn cubic metres of gas annually via this so-called Eastern Route.

The next step for Gazprom is an agreement on gas deliveries to China via the 'Western Route' through the Altai main gas pipeline. The Altai line connecting Gazprom's Yamal peninsula gas fields in Western Siberia to Western China is a priority for Gazprom as it provides an alternative to exports to Europe. The line will be 2,700 km long and have capacity of about 30 billion cubic metres a year, with a likely eventual increase to 100bn cubic metres.

The company said in April it will expand its 2015 investment programme by at least $4bn. The extra spending will be used for projects directed at China, like the Power of Siberia and Altai pipelines and the resource base in the Far East. The year's investment was previously set at RUB839bn ($15.1bn).

 

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