Global Processing

Gazprom signs 30-year gas delivery contract with China

May 27, 2014
<photocredit>Gazprom headquarters in Moscow (Wikipedia Commons/Ghirla)</photocredit>

Russia and China have signed a historic 30-year gas delivery deal that is estimated to be worth more than $400 billion. But the political dimensions of the agreement might be more important than the purely financial metrics, industry experts comment.

The agreement was signed at a summit in China, with Russian gas expected to start flowing towards China in 2018. Under the terms of the agreement about 38 billion cubic meters of natural gas will be carried to the Asian country annually. According to Gazprom's chef executive, Alexei Miller, the deal covers the delivery of over one trillion cubic metres of gas over the period and is the largest contract ever signed by Gazprom. Gas supplies are predicted to fuel China's growing economy, amid the country's struggle with air and water pollution caused by excessive use of fossil fuels.

Russia has been trying to find a large-scale market for its natural gas production as it faces sanctions from the European Union over its actions in Ukraine. With its European market at risk, Russian gas exports could be seriously hit. Securing a market as big as China, however, eases potential concerns for President Vladimir Putin and his administration.

The deal between Gazprom and China National Petroleum Corp (CNPC) took several years to conclude, BBC News reported. In a statement to Russian news channel Rossiya, President Putin said that both sides were satisfied with the price and added that it was an "absolutely calibrated, general formula for pricing."