LNG

Russian natural gas giant Gazprom has found another outlet for its resources stranded by Western sanctions over the war with Ukraine by signing new supply deals with the Central Asian republics of Uzbekistan and Kazakhstan.

Gazprom signed an agreement with Uzbekistan to supply gas volumes and also signed an accord with Kazakhstan’s QazaqGaz to provide services for the transportation of Russian natural gas through Kazakhstan to customers in Uzbekistan while also promising more volumes to the Kazakhs.

The two-year agreement will provide 9 million cubic metres per day, or around 2.8 billion cubic metres per annum, of pipeline natural gas to Uzbekistan.

Oil focused

Uzbekistan is an oil and natural gas producer, though its output leans mostly towards oil.

The overall deal is for the transit of 6 Bcm of gas annually, which implies that other Central Asian countries may also come to import more Russian gas via this route.

The details of the natural gas supply deal were revealed on October 7 at a ceremony attended by Russian President Vladimir Putin, Uzbekistan President Shavkat Mirziyoyev and Kazakhstan President Kassym-Jomart Tokayev.

The search for new pipeline gas customers by Gazprom has continued after Western sanctions on pipeline gas to Germany and the European Union, though there were no specific sanctions on LNG and cargo deliveries continue.

The Gazprom-operated Sakhalin LNG plant in the Russian Far East lost Shell as a shareholder but Japanese shareholders remained on board as they rely on the more than 9 million tonnes per annum of deliveries to Japanese terminals.

Kazakhstan is the largest southern neighbour of Russia in Central Asia and Uzbekistan lies to the south of Kazakhstan.

There is also a Central Asian natural gas pipeline in the region that is connected to China and supply flows to the Chinese are increasing year-on-year,

China pipeline

The pipeline supplying the Chinese from the west originates on the Turkmenistan-Uzbekistan border and passes through Kazakhstan on the 3,665 kilometres (2,277 miles) route to Horgos in the Xinjiang region of China.

A statement on the Gazprom deal with Uzbekistan and Kazakhstan said that the “blue fuel” from Russia would be sent to Uzbekistan via Kazakhstan, with a share of it also going to Kazakhstan. 

“Firstly, this is an important factor in the energy security of our country and the entire region. Secondly, the supply will provide for additional volumes of gas for the uninterrupted supply to economic sectors and the population,” said the President of Uzbekistan Shavkat Mirziyoyev.

According to Mirziyoyev, the implementation of this project was a “vivid example” of successful mutually beneficial cooperation between Russia, Kazakhstan and Uzbekistan in the energy sector.

“The implementation of this project will have obvious benefits for all three countries. Uzbekistan will get an additional source of energy, allowing it to guarantee an uninterrupted supply of heat and electricity to households and socially important facilities. Kazakhstan will be able to solve the issue of gasification of its northern and eastern regions,” said Gazprom 

Air Products, the US LNG equipment-maker and industrial gases company with several mega-projects in the Middle East and Asia, has signed a deal with the Uzbekistan Government and the national gas company to acquire a gas-to-syngas facility for $1 billion in the former Soviet republic.

Russian pipeline natural gas giant Gazprom and the Chinese energy major, China National Petroleum Corp. (CNPC), have signed a new long-term Sales and Purchase Agreement for additional gas to be supplied in the Far East via Mongolia.

“The signing of this document is an important step towards further strengthening the mutually beneficial cooperation between Russia and China in the gas sector,” said Gazprom.

“As soon as the project reaches its full capacity, the amount of Russian pipeline gas supplies to China is going to grow by 10 billion cubic metres, totalling 48 Bcm per year,” added the company.

Gazprom, based in Saint Petersburg, said these deliveries to China include those via the existing “Power of Siberia” gas trunkline.

“This is the second contract to be signed for Russian gas supplies to China, and it is indicative of the exceptionally strong mutual trust and partnership between our countries and companies,” said Gazprom Chief Executive Alexey Miller.

“Our Chinese partners from CNPC have already seen for themselves that Gazprom is a reliable gas supplier,” stated Miller.

Gazprom stated that CNPC, a state-owned oil and gas company, had emerged as Gazprom’s main partner in China.

Power of Siberia II

Gazprom and CNPC signed their 30-year Sales and Purchase Agreement for 38 Bcm per annum in 2014 via the “Power of Siberia” gas pipeline.

The actual start of deliveries to the Chinese was on the 2nd of December 2019 when a ceremony was held to mark the event.

Gazprom explained that in January 2022, a feasibility study was completed for the Soyuz Vostok gas trunkline construction project.

The Soyuz Vostok pipeline will stretch for 963 kilometres (598 miles) on Mongolian territory and will also include five compressor stations.

The trunkline will become an extension of Russia's “Power of Siberia II” gas pipeline and will make it possible to supply the additional 10 Bcm per year to China.

The “Power of Siberia” pipeline is 3,000-kilometres (1,865-mile) in length for the Russian section to the Chinese border.

Analysts note that Russia had been offering to get a pipeline built to China for about a decade before China through CNPC agreed to it in 2014.

They said that the timing of that 2014 agreement was not accidental, but followed sanctions that Western countries imposed on Russia after it invaded Ukraine and took over Crimea.

Now that the Ukraine crisis with Russia has again blown up, the Russians have announced a new China gas supply deal.

It comes at a time when the Nord Stream II pipeline for Russian gas to Germany has been blocked by the Germans supported by the European Union and the project suspension is now tied up with the Ukraine issue.

China is already the world's largest natural gas consumer in 2022 and buys about 43 percent of its gas from abroad, including 106 Bcm (79 million tonnes) of LNG and 58 Bcm of pipeline gas, according to the country's General Administration of Customs. 

China confirmed that 2020 liquefied natural gas imports hit a record as energy needs continued to grew even after the slowdown in the first half caused by the Covid-19 pandemic.

China National Petroleum Corp, the country's largest oil and gas company, said it had increased efforts to import more pipeline natural gas from Central Asian countries and Russia and to connect the supplies to Chinese customers to complement LNG imports.