After some initially-confused western reporting, it’s now clear Russia’s Gazprom finally did close a long-term natural gas deal with Chinese national oil company CNPC. However, there is still wide speculation about the agreed price – a sticking point that held up the deal’s closure for a decade – and equally if not more importantly, questions regarding infrastructure financing and the upstream partnership structure remain.

Additionally, the deal appears to greatly increase competition for companies looking to sign long-term LNG supply contracts with Chinese firms and could make it more difficult for LNG project developers to obtain higher prices for their supply, as gas piped into China is cheaper than LNG. “Terms of the just-signed deal between Russia and China weren’t disclosed, although sources suggest it was in the region of $9-$10 per million British thermal units (mmBtu). This would mean the Chinese are getting a better deal than Russia’s European buyers, who pay about $10.60 per mmBtu…What the Russia-China deal does, though, is set a new benchmark for natural gas pricing in Asia.” (Even if no one knows what that benchmark is!) [Reuters]

Interestingly, The Wall Street Journal reports China’s pipeline gas supply deal with Turkmenistan includes a price of about $10 per million Btu, but Gazprom would need closer to $12/MMBtu to breakeven on producing more technically challenging Siberian gas. “The two sides didn’t mention whether China would take stakes or participate in developing gas supplies on the Russian side, something experts say has been long sought by Beijing as a way to secure supplies.” [Wall Street Journal]

The Financial Times reminds us that China’s trade with the US and other developed western countries dwarfs that of Russian trade. “Beijing remains very much aware that bilateral trade with the US is three times greater than its trade flows with Russia. ‘China still wants to build a major power relationship with the US,” Mr Wang added. ‘China’s interdependence with the world, especially the west, is much higher than Russia’s. We are more concerned about our relations with the west. We are benefiting from globalisation.’” [Financial Times]