On September 20, a working meeting between Alexey Miller, Chairman of the Gazprom Management Committee and Dai Houlin, Chairman of the Board of Directors of CNPC (China) was held in Beijing (PRC). The parties considered questions of development of strategic cooperation on a wide range of the directions. A high level of trust and partnership between the companies was noted.

The meeting participants paid special attention to Russian gas exports to China. Gazprom ensures reliable supplies via the «eastern» route — the Power of Siberia gas pipeline, with the company’s daily contractual obligations regularly exceeded.

The Additional agreement to the Contract of purchase and sale of gas along the «eastern» route was signed at the meeting. According to inquiry of the Chinese partners the parties coordinated additional deliveries in December, 2024. This will ensure that daily gas supplies to China via the Power of Siberia pipeline reach the maximum contractual level ahead of schedule (earlier it was planned to do so in early 2025).

PJSC Gazprom and CNPC have a 30-year Contract for the purchase and sale of gas through the Eastern route (via the Power of Siberia gas pipeline) in the amount of 38 billion cubic meters of gas per year. A ceremony marking the start of the first-ever pipeline deliveries of Russian gas to China was held on December 2, 2019.
Construction works on the second – the Far East route are being carried out according to the planned schedule. It is known that in February, 2022 the long-term Contract of purchase and sale of natural gas along the Far East route was signed. Once the project reaches full capacity, the volume of Russian pipeline gas supplies to China will increase by 10 billion cubic meters and cumulatively reach 48 billion cubic meters per year.

«In 2027 the Far East route on 10 billion cubic meters of gas a year will be started. With an exit of the Power of Siberia and the Far East route on a full load Russia will become the largest supplier of gas to China»,  the Chairman of the Board of PAO Gazprom Alexey Miller said.

Negotiations on the construction of the Power of Siberia-2 gas pipeline system with a capacity of 50 billion cubic meters of gas per year are currently ongoing. In addition, there is a possibility to increase the capacity of Power of Siberia. This becomes especially relevant in the context of growing tension between China and the US. The Americans threaten to disrupt LNG supplies to China, but they cannot affect pipeline supplies from Russia.

On September 3 the Chinese National Pipeline Corporation (CNPC) reported on completion of works on connection of underwater transition under the Yangtze River of the gas transmission system (GTS) for import of natural gas from Russia via the «eastern» route with a land part of the pipeline. For this purpose, a curved section of the pipeline was constructed at the entry point of the crossing. The construction of the southern section of the GTS has entered its final stage.

In the territory of China GTS for acceptance of supply of gas from Russia along the «eastern» route is divided into three sites: northern, central and southern. Construction of a northern site (Heykhe — Changling) was complete in October, 2019, the central site (Changling — Beijing) — in December, 2020. Now construction of the southern site which will allow transporting natural gas directly from Beijing to Shanghai is conducted. Building of underwater transition under the Yangtze

River is considered the most difficult stage of construction of the southern site of the «eastern» route.

In December 2022 (14 months ahead of schedule), CNPC completed the construction of a tunnel for the pipeline under the Yangtze River. In June 2023, CNPC reported the completion of steel erection in the underwater tunnel. In September 2023, it began laying the pipelines in the tunnel and completed the laying in May 2024. Construction of the entire southern section was originally scheduled to be completed by mid-2025, but the timeline has now been pushed back to late 2024. According to CNPC in spite of the fact that construction of the southern site of the gas transmission system along the «eastern» route in China proceeds, the gas imported from Russia comes to the uniform CNPC gas transmission system thanks to what there was a possibility of supply of gas to Shanghai and other regions of China.
On September 18, the Head customs office of the People’s Republic of China reported that in August China imported 16.2 billion cubic meters of gas (+9.1% of g/g), including on gas pipelines – 7.19 billion cubic meters (+14.6%), in the form of LNG – 9.01 billion cubic meters (6.54 million tons) (+5.1%). In January — August import of People’s Republic of China gas reached 120.06 billion cubic meters (+12.3%), including on gas pipelines – 50.76 billion cubic meters (+14.4%), in the form of LNG – 69.3 billion cubic meters (50.29 million tons) (+10.7%).

The Chinese academic journal Goji shiyu jingji published an article in which it says that in 2011-2023 in China, 175 oil and gas blocks (including unconventional oil and gas blocks) with a cumulative total of 175 oil and gas blocks (including blocks of unconventional oil and gas) with a combined 200,000 square kilometers, of which 153 blocks with an area of 161,000 square kilometers were sold to nearly 70 investors (including state-owned oil and gas companies). Despite it, the total area of the sites licensed for carrying out exploration on oil and gas in China is reduced: in 2001 it made 2.7 million sq. km, and so far decreased to 2.5 million sq. km. Many companies refuse earlier acquired licenses, activity of the private companies in the market remains low, tenders and auctions for new blocks are carried out seldom and irregularly. Among problems in this branch are also noted difficulties with extension of licenses, lack of the well thought-out policy and planning in the sphere of the organization of new auctions and tenders, low selection criteria among candidates, as well as poor quality of the blocks offered for sale. Since the beginning of the last decade, China has been reforming its oil and gas industry to increase the number of players in the oil and gas market, including exploration, prospecting and development, especially of unconventional oil and gas. The entry into mining projects was simplified for private Chinese companies, foreign enterprises were granted the right to independently implement onshore production projects, and the China National Pipeline Corporation was established to provide oil and gas companies with access to transportation infrastructure. A number of tenders, including with involvement of foreign investors, on oil and gas blocks were carried out to the period from 2011 to 2023. At the same time, the companies which obtained licenses following the results of these tenders during implementation of projects faced a number of difficulties: poor quality of blocks, shortcoming or lack of necessary infrastructure, lack of experience and technologies, difficulties with attraction of financing. It was not reported about transition of projects with participation of new private investors to a stage of commercial development. Many companies, on the contrary, refused continuation of participation in projects. In particular, all foreign investors who were taking part in projects on development of slate gas refused continuation of participation and did not show interest in the followed tenders.

The total area of oil and gas license blocks in China is shrinking primarily because state-owned oil and gas companies are relinquishing the least promising areas that they previously received as a result of government allocation.

At the same time in China capacities of gas generation increase. In the first half of the year in China 7.5 GW of new capacities of gas generation were put into operation. Cumulative power of gas thermal power plants in China reached 133 GW. A Province of Guangdong (58%) was the region in which entered the greatest volume of capacities of gas generation was, it is followed by Anhui (24.1%), Sichuan (9.4%), Shandong (7.4%) and Hubei (1%).

Following the results of 2023 the volume of rated capacities of gas generation in China made 125.6 GW, a share of gas power plants in the generating capacities is 4.3%. Consumption of natural gas in the sphere of development of heat and generation of the electric power made about 80 billion cubic meters. 80% of gas power plants are concentrated in three regions: Province of Guangdong; «Shanghai» region (Shanghai, Province of Jiangsu and Zhejiang); «capital» region (Beijing, Tianjin, Province Hebei).

Indicators of the first half of the year show acceleration in the growth rate of gas generation capacity in China. For all 2023 10.3 GW of capacities of gas generation were put into operation. It is expected that in the medium-term and long term the sector of gas generation can become main «driver» of demand for natural gas in China. It is expected by the Institute of Power Researches of the China State Grid Corporation that by 2030 the volume of rated capacities of gas generation will grow to 220 GW, by 2045 — 290 GW, by 2060 — to 300 GW.

The policy on achievement of «two carbon purposes» — to achievement of peak of carbon emissions by 2030 and «carbon neutrality» by 2060 is realized in China. According to the official report of the Public Power Administration of the People’s Republic of China, natural gas is «an important component of performance of tasks of aspiration to «carbon neutrality» in China. Capacities of gas generation can become for China an important tool for smoothing of peak load of power networks and irregularities in the mode on renewables.

It speaks about good prospects of growth of gas export from Russia to China. It is accepted to compare supply of pipeline gas to the People’s Republic of China from Russia and Turkmenistan. By the way, these countries have absolutely different parameters of cooperation. Turkmenistan granted to the Chinese companies the right to extract gas in the territory. The pipeline was built by Chinese companies using Chinese pipes and equipment. Money for implementation of the project was provided by Chinese banks. In turn, the Power of Siberia was built by Russian companies using Russian pipes and the equipment. The gas from the fields in Yakutia and Irkutsk region, which will fill the pipeline, is produced by Gazprom, not Chinese companies. This is why it is easier for the Chinese to negotiate gas prices with Turkmenistan, since much of the money stays in China.