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Russia and China prepare to launch first connecting natural gas pipeline

Russia and China prepare to launch the first natural gas pipeline to connect the two countries.

The 'Power of Siberia' pipeline, due to open on Dec. 2, will pipe natural gas around 3,000 km (1,865 miles) from Russia's Siberian fields to the fading industrial region, which has lagged the push to gas in China's south and east.

The pipeline - which will deliver gas under a 30-year, $400 billion deal signed in 2014 - has the potential to transform northeast China's energy landscape and even slow the country's surging imports of liquefied natural gas (LNG).

It will also make Russia a key supplier to China, to rival Turkmenistan and Australia, boosting ties amid Beijing's trade war with the United States.

More immediately, it poses a challenge for the sole marketer of the gas, China National Petroleum Corp (CNPC), or PetroChina, as it looks to drum up demand in the relatively sparsely populated region that has relied on coal for heating during sub-zero winters.

The pipeline will emerge in Heilongjiang, which borders Russia, and feed on to Jilin and Liaoning, China's top grain hub, where rust belt industries have long been overshadowed elsewhere.

The region's industry and 68 million city dwellers consume just 14 billion cubic meters (bcm) of gas a year, well below the 38 bcm the pipeline will deliver at full capacity by 2025.

Russia's Gazprom has said it expects to supply 4.6 bcm in 2020, rising to 10 bcm in 2021, 16 bcm in 2022, 21 bcm in 2023 and 25 bcm in 2024.

Neither PetroChina nor Gazprom has revealed the gas pricing terms, but Beijing-based analysts said the price is linked to crude oil or a basket of competing fuels.

The pipeline will cement China's spot as Russia's top export market and give Russia a potentially enormous new market outside Europe.

Russian President Vladimir Putin has said trade between the neighbours would reach a record $100 billion this year, up from $87 billion in 2018. Moscow sees that figure rising to $200 billion by 2024 thanks in part to gas.

(Production: Maria Vasilyeva)


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