The Russia-China gas realignment is one of the key gas market uncertainties over the medium-term.
Russia could increase its gas exports to China from around 40 bcm in 2024 to around 150 bcm if all announced projects go ahead.
In terms of piped gas, Power of Siberia is ramping up this year to 38 bcm, in line with the original contractual terms. the two fields supplying Power of Siberia (Chayandaskaya and Kovytka) have a combined nameplate capacity of over 50 bcm/y, meaning that there is further upside in supplying China via that route. Gazprom and CNPC most recently agreed to supply an additional 6 bcm/y via Power of Siberia.
The Far East pipeline is expected to start-up operations in 2027 and ramp-up to 10 bcm/y towards the end of the decade, with a potential upside flex of 2 bcm.
In terms of LNG, Russia is currently supplying around 10 bcm. after the EU ban on Russian LNG, Yamal cargoes are most likely to be diverted to Asia, with China likely to be a key destination market.
In addition, Russia stated to deliver LNG to China from its Arctic LNG 2 project, despite all the international sanctions. at full speed, Arctic LNG 2 could deliver about 18 bcm/y from its two trains -although lower operation rates and logistical issues could limit this.
Last but not least, the giant Power of Siberia 2 project could supply 50 bcm/y of gas to China. the project was under discussion for more than two decades, and at least every two years a memorandum of understanding is signed… while a firm supply contract is still lacking.
And all of this gives us an uncertainty range between 60-150 bcm, which could certainly impact the global gas balance and consequently the evolution of gas prices, both in Europe and in Asia.
What is your view? how will the China-Russia gas relationship play out? could we see a rapid ramp-up of Russian gas deliveries over the medium-term? what are the main challenges ahead? and what would be the impact on the global gas market?
Source: Greg MOLNAR
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