China Accelerates Development In Western Region

A worker sweeps the floor at the Changqing Oil and Natural Gas Purification Plant on May 27, 2005 in Jingbian county in western China’s Shaanxi province.

It appears increasingly likely that Russia’s Gazprom will finally ink a long-term natural gas supply deal with Chinese national oil company CNPC next week, although price negotiations continue, as they have for over a decade.

China is set to receive greater volumes of gas from Turkmenistan – and recently met with the country’s President Gurbanguly Berdymukhamedov – but Russian supply would more easily reach population centers and help diversify import sources, according to Citi research.

“While Central Asian gas can meet its share of China’s increased gas imports, it is an imperfect substitute for Russian gas, which would come from a different direction, serve a different region of China, cross the border much closer to large population centres and give China needed diversification of its imported gas sources,” Citi said. – Reuters

All eyes are on the final negotiated price, which Citi estimates could be around $11/mmbtu, comparable to the price many European customers now pay for Russian gas. Additional detail provided in this WSJ article.