China braces for rising gas prices

When Belarus reluctantly accepted a sharp rise in the price of Russian gas in the dying minutes of 2006, China started preparing for higher natural-gas prices in the middle and long terms.

A last-minute natural-gas pricing deal between Russia and Belarus was inked on December 31 under which Belarus would have to buy Russian gas at a much higher price of US$100 per 1,000 cubic meters in 2007.

Such aggressive action taken by Russia indicates that it is unlikely that China will be able to import natural gas from Russia

at a low price in the future, though negotiations between Beijing and Moscow over the construction of a Sino-Russia gas pipeline are still in progress.
Experts with China Petrochemical Corp (Sinopec) said China’s increasing dependence on natural gas imported from Russia means that domestic gas prices may go up.

A report by the Shanghai Securities News said talks between China National Petroleum Corp (CNPC) and Russia about importing natural gas from Sakhalin-I had foundered on price issues. China’s top oil producer signed a gas-import framework agreement in 2006 with Sakhalin Energy Investment, the company that operates the Sakhalin projects and which is a major Russian exporter of liquefied natural gas (LNG).

When attending an industrial forum in November, Koert Vonkeman, vice president for marketing at Sakhalin Energy Investment, said China will have to pay international prices for LNG imports sooner or later.

Asia Times