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Win-win cooperation lifts China-Russia energy partnership to new high

MOSCOW
2016-05-30 09:21

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Energy cooperation between China and Russia, featuring mutually beneficial cooperation in oil, natural gas, electricity, coal as well as nuclear and renewable energy, has been ever growing and has reached a new high.

After 10 years of negotiations, China and Russia, during Russian President Vladimir Putin's visit to China in May 2014, struck a long-awaited 30-year natural gas deal with a total value of 400 billion U.S. dollars.

Under the deal, Russia will supply China with 38 billion cubic meters of gas annually via the eastern "Power of Siberia" route, a some 3,000 km long pipeline that traverses the vast Siberia to China's northeast regions. After the start of pipeline construction on the side of Russia in 2014, construction on the side of China began in June 2015.

For China, the massive supply from Russia will not only help quench the thirst for natural gas in its populous eastern regions, but also bring about changes to a coal-independent energy structure that has partly been the scourge of a pounding pollution headache in the country.

For Russia, whose gas export to the traditional European market has been fairly affected by its strained ties with the Europe Union (EU) since the outbreak of the Ukraine crisis, the stepped-up cooperation with China will help reduce its reliance on energy sales to Europe, while opening up a financing channel for development in the Far East region, particularly given the fact that the EU has decided to extend the anti-Russia sanctions.

Energy cooperation between the two sides has borne tangible fruits. In spite of a sharp decline in overall bilateral trade in 2015, Russia, according to statistics released by China's General Administration of Customs, came as the second largest oil supplier to China last year with a volume of 42.43 million metric tons, up 28 percent compared with 2014, when China overtook Germany as Russia's top crude oil consumer.

Chinese firms have been deeply involved in joint-venture projects of natural gas exploitation with Russia. The Yamal LNG plant, a liquefied natural gas mega-project launched in late 2013 and located above the Arctic Circle, has potential gas reserves of more than 900 billion cubic meters and is slated to produce 16.5 million tons of liquefied natural gas per year from 2019. China's energy giant PetroChina now holds a 20 percent stake in the Yamal LNG project, with China's Silk Road Fund -- a state-owned investment fund -- owning a 9.9 percent stake and providing a 15-year loan of around 790 million dollars to finance the project.

Besides, some Chinese companies will be responsible for the production of modules for various programs at the plant. During Putin's visit to China in September 2015, Rosneft, leader of Russia's petroleum industry, signed an agreement with its Chinese counterpart, Sinopec, under which the latter was authorized to acquire a 49 percent stake in two of Rosneft's subsidiaries. With advantages of supply and transit, Russia serves as a vigorous contender with those in the Middle East and Africa.

Within the context of the alignment of China's Silk Road Economic Belt initiative with the Russia-led Eurasian Economic Union, there are broad prospects for the enhancement of energy cooperation between China and Russia.

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