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Russian gas to China: 2019 start threatens China’s LNG import growth


Russian gas to China: 2019 start threatens China’s LNG import growth

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.


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Description

This Gas Markets Insight report highlights the key issues surrounding this topic, and draws out the implications for those involved.

For participants, suppliers and advisors who want to look at the trends, risks and issues surrounding this topic, this report gives you an expert point of view to help inform your decision making.

We provide detailed supply, demand and price forecasts based on our integrated upstream, power, coal and LNG research. Our regional gas experts are based in the markets they analyse, providing comprehensive analyses of regional and global gas markets.

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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
  • Conclusion
    • Further reading

In this report there are 8 tables or charts, including:

  • Executive summary
  • Gazprom relies on expensive gas and pipe developments to deliver gas to China
    • Weighted average delivered costs to Russia-China border
  • Competition from Chinese domestic production after PoS starts
    • Supply cost comparison in northern China in 2020
    • Russian East gas flow vs Chinese LNG demand
  • Completing PoS on time will be costly and challenging
    • Power of Siberia and Amur GPP
  • Pressure on Gazprom’s cash flow may impact pipeline construction
    • Gazprom infrastructure expenditure
  • Conclusion
    • What to watch: Uncertainty around base-case scenario for Power of Siberia gas
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