Russia’s Gazprom seems willing to sell gas to China at a steep discount over the next three years – almost half the price European buyers will pay. Prime Minister Mikhail Mishustin indicated that pipeline gas will be sold to CNPC for $271.6 per thousand cubic meters from 2024, while buyers in the EU and Turkey are charged $481.7 on average.
Those price differences could stay in place through to 2026, according to a new economic outlook compiled by Mishustin.
This year, in contrast, Gazprom has been selling pipeline gas to state-owned CNPC at an average of $297.3 per thousand cubic metres, so prices are bound to fall starting from next year as Gazprom is preparing to supply greater volumes to China via the second leg of the Power-of-Siberia pipeline.
Hard bargain for cheaper price
Though “practically all parameters” for Power-of-Siberia 2 – a new 50 bcm/y interconnector to China – have been agreed, China had long abstained to sign a deal as it wanted to bargain for a better price for gas deliveries. Gazprom wants to supply up to 98 bcm of gas by 2030, but analysts doubt China will need that much.
Clearly, Russia’s latest offer for pipeline gas deliveries to China shows that it pays off for CNPC to wait for prices to fall as Gazprom is desperate to find alternative buyers outside Europe.
But Beijing is holding back given that Gazprom already delivers gas to China through the first Power-of-Siberia pipeline under a 30-year contract, worth some $400 billion which was concluded in 2019 after hard-fought negotiations on price.
"The original target is for China to import 38 bcm of Russia gas by 2025. Now Russia is saying this will reach 98 bcm by 2030. That is a very big jump, so it pays to be slightly cautious on that," ICIS’s China gas analysts Wang Yuanda commented.