Russia pledges gas pipelines to China

Russia on Tuesday promised to build two natural gas pipelines to China and to become one of the country’s biggest gas suppliers within the next decade.

The agreement, signed during a state visit to Beijing by Vladimir Putin, the Russian president, raised fears of shortages of Russian gas in Europe, especially since some of the Russian gas headed to China would be tapped in western Siberia at fields that supply Europe.

Russia holds the world’s largest reserves of natural gas. It appears to be playing Europe, its largest current consumer, and China, its largest potential customer, off each other, analysts said.

..However, the massive scale of Russia’s promises to China raised questions about whether it would indeed deliver on the accord. The pipelines would cost as much as $10bn to build and the agreement would involve Russia supplying China and the Asia Pacific region 60-80 billion cubic metres of gas, two times China’s total consumption in 2004. Today, Russia supplies none of China’s gas needs.

Claude Mandil, executive director of the International Energy Agency, the consuming countries’ energy watchdog, on Tuesday warned Moscow that it would be unable to meet its obligations to European consumers if it did not focus its investment in Russia. The IEA calculates Russia must invest $11bn a year, mainly in production and transportation of natural gas, to meet growing demand, mainly from Europe.

Financial Times