13 Oct 2009 12:37

China, Russia initial gas supply agreement

BEIJING. Oct 13 (Interfax) - China and Russia initialed a gas supply agreement this morning and will sign it later today, Gazprom Chief Executive Alexei Miller told reporters in Beijing.

"The frame agreement on the main terms for gas supply to China has been initialed and it will be signed on Tuesday in the presence of the Russian and Chinese prime ministers," Miller said.

The agreement calls for gas supply via two routes - Western and Eastern. Gas supplied by the Western route will be sourced in West Siberia, and gas via the Eastern route in East Siberia, the Far East and Sakhalin shelf, Miller said.

Overall gas supply via the two routes will be approximately 70 billion cubic meters per year, including 30 bcm via the Western route and 38 bcm via the Eastern route, he said.

The contract will set down the exact volumes, he said.

"Only the contract will define the price, and the pricing principles will be determined when the contract is signed," Miller said.

Miller said the contract would contain a formula that is linked to export prices to Europe. "Pricing will be built on Gazprom's practice of gas export deliveries," he said.

Miller did not say when the gas might be supplied to China.

Miller said the Western route might be launched sooner because reserves and infrastructure are in place and there is no need to build gas treatment capacity. "Pricing is the only issue here," he said.

But there are gas export via the Eastern route is not as straightforward because the East Siberian gas is complex in nature, he said.

Gazprom will create transportation capacity on its own territory by itself, Miller said.