26 Jun 2020 15:50

Gazprom in talks to boost gas deliveries to China to 130 bcm per year

MOSCOW. June 26 (Interfax) - Gazprom is already delivering gas to China via the Power of Siberia pipeline and is discussing boosting shipments via this route by a further 6 bcm to 44 bcm per year, as well as the organization of deliveries from the Far East, construction of Power of Siberia 2 and the "western route", Gazprom chief Alexei Miller said in the interview following the company's annual general meeting (AGM).

China's demand for gas will grow at a quick rate. "Last year, gas consumption in China increased by almost 10% and exceeded 300 bcm. In 15 years, demand for gas in the country may double," he said.

"Today, Gazprom supplies gas to China via the Power of Siberia pipeline. And in just a few years we will increase its volume to 38 bcm. The increase in supply through the Power of Siberia will outpace both liquefied natural gas imports and Central Asian gas supplies to China," Miller said.

"At the same time, we are currently in talks with our Chinese partners concerning a 6 bcm increase in gas supplies via the Power of Siberia gas pipeline to 44 bcm a year, organization of gas supplies from the Far East, construction of Power of Siberia 2 and the 'western route'. Taken together, this makes it possible to speak of pipeline gas exports to China in the foreseeable future in the amount of over 130 bcm, which is comparable to our current supplies to traditional markets," Miller said.

New projects 

New major gas processing projects will add value and boost cash flow for Gazprom, Alexei Miller said in the interview.

The importance of downstream projects for Gazprom is "increasing greatly" at present, he said.

"Last year we passed the equator in the construction of the Amur Gas Processing Plant and began a project at Ust-Luga. Both enterprises will rank among the world's biggest. I'll mention separately the successful deal to attract project financing for the Amur plant. The volume is 11.4 billion euros, the most in Gazprom's history," he said.

Miller said that as new deposits come on stream "we are increasing our presence geographically, but the composition of the gas is altering."

"There is more and more multi-component gas containing ethane. This concerns both the new Eastern fields - Chayanda and Kovykta - and the deeper lying reservoirs of fields in the Nadym-Pur-Tazovsky region of West Siberia. And this is the objective reason why we have significantly strengthened our downstream business. In the East we are building the Amur GPP and in the West the Ust-Kuga complex. These plants will be among the world's biggest. Also, the Amur GPP will be the leading helium producer and the complex in Ust-Luga the biggest for the production of liquefied natural gas by volume in the Northwest European region. And of course processing means added value and therefore significant additional cash flow," Miller said.

Margin of safety

Gazprom is still the biggest gas exporter to Europe and has a bigger margin of safety in that market than its rivals, Miller said.

"As regards the European market, we continue to reliably supply gas to our consumers and we are still the biggest exporter there. This is not the easiest of times for the gas market. All of its participants are experiencing problems, but we have a bigger margin of safety," he said.

"Gazprom has a whole range of major advantages like its rich resource base, balanced trading portfolio, flexible supply terms and the latest trading instruments. Even now we are broadening our cooperation: we have just signed a long-term contract to supply gas to Greece," Miller said.