China turns to Russian gas to curb dependence on Quad members

Eager to no longer depend on geopolitical rivals like the U.S. and Australia for natural gas, China is forging ahead with new pipeline projects to boost imports from Russia.

Preparations for a new pipeline to the Russian island of Sakhalin are in full swing in China’s border province of Heilongjiang despite still frigid temperatures. “Construction will pick up as soon as spring comes,” said a source familiar with the project.

State-owned China National Petroleum Corp. has agreed to import more natural gas from Russian major Gazprom in a deal announced on the sidelines of a summit between Chinese President Xi Jinping and Russian President Vladimir Putin last month.

Currently, the only gas pipeline between Russia and China is Power of Siberia, which began operating in 2019 and has an annual capacity of 38 billion cu. meters. The countries plan to establish a new pipeline under the deal with an annual capacity of 10 billion cu. meters.

New developments are underway in Russia as well. Gazprom on March 1 announced it had begun taking concrete steps toward the construction of the Power of Siberia 2 pipeline, which would pass through Mongolia and have an annual capacity of around 50 billion cu. meters.

Pollution-plagued China swapped out more of its coal for natural gas to clear its skies for the Beijing Winter Olympics. But the country relies on imports for nearly half the gas it consumes. Around two-thirds of those imports come in the form of liquefied natural gas, and China last year overtook Japan as the world’s largest importer of the fuel.

China imports about 40%, the biggest portion, of its LNG from Australia. Just over 10% comes from the U.S.

“We’ve been growing more dependent on members of the Quad, and that was an issue we needed to resolve,” said a Chinese energy industry insider, referring to the Quadrilateral Security Dialogue of the U.S., Australia, Japan and India.

China sees Russia as a potential solution to its dilemma. The two sides are in talks to expand or build four pipelines, according to Liu Qian, the executive deputy director of the Russia-Central Asia Research Center at the China University of Petroleum, reports the Communist Party-affiliated Global Times.

A ceremony is held to mark the start of construction of the Power of Siberia trunk pipeline, in Heihe in northeastern China’s Heilongjiang Province, in June 2015. (Photo by Chinatopix via AP)

 

These projects, which include the Power of Siberia expansion and the new Altai link through China’s Xinjiang region, would expand pipeline capacity between the countries to over 100 billion cu. meters a year — equivalent to almost half of China’s imports.

The expansion benefits Russia as well. The country supplied between 170 billion cu. meters and 200 billion cu. meters of natural gas to Europe through pipelines in recent years. The new and expanded links with China are expected to help offset the decrease in exports to Europe over the war in Ukraine.

Still, obstacles remain. Power of Siberia sent 10 billion cu. meters of gas to China last year, less than 30% of its total capacity. The shortfall is attributed to limited transportation capabilities on the Russian side.

Gas for export to China and to Europe are also extracted at different locations, with no pipelines connecting them. “There needs to be massive investments in pipelines and other facilities in order to divert natural gas meant for export to Europe to China,” said an executive at a Chinese investment company.

And while China also faces tensions with the U.S. and Europe over human rights abuses against its Uyghur minority, among other issues, it cannot risk triggering a full-out economic standoff with the West.

“We depend on American companies for semiconductors, which are critical in IT products,” said a regional Chinese government official. “We do not want to deepen the rift with the U.S. and Europe and further.”

Author: SHUNSUKE TABETA, NIKKEI Asia

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