Insight
Russian gas to China: 2019 start threatens China’s LNG import growth
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
Gazprom and CNPC announced they would start gas supplies via the yet-to-be-built Power of Siberia pipeline on 20 December 2019. This is early in the previously agreed 2019-2021 start-up window. The gas supply deal is significant in balancing China’s long-term gas supply and demand. However, Russian gas exports will face challenges from cheap China domestic supplies in the near term. Given competition from domestic gas, we think initial volumes could be small, accommodating seasonal demand swings in China’s northern markets. Potential for piped gas supply could discourage China's requirement for LNG. The earlier start-up and ramp-up of Russian gas exports could partially cause China’s LNG demand growth to slow after 2020.
Table of contents
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Executive summary
- Strong political support for 2019 Power of Siberia (PoS) start
- Motivations haven’t changed since the deal was signed but the market has
- Completing PoS on time will be costly and technically challenging for Gazprom
- Marketing will be challenging for CNPC until after 2023
- Development creates uncertainty around China’s LNG demand growth, especially in winter
- Gazprom relies on expensive gas and pipe developments to deliver gas to China
- Competition from Chinese domestic production after PoS starts
- Completing PoS on time will be costly and challenging
- Pressure on Gazprom’s cash flow may impact pipeline construction
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Conclusion
- Further reading
Tables and charts
This report includes the following images and tables:
- Weighted average delivered costs to Russia-China border
- Supply cost comparison in northern China in 2020
- Russian East gas flow vs Chinese LNG demand
- Power of Siberia and Amur GPP
- Gazprom infrastructure expenditure
- What to watch: Uncertainty around base-case scenario for Power of Siberia gas
What's included
This report contains:
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