China and Russia restart negotiations on natural gas

It took six years, intermittently. The Chinese and Russian sides will once again sit on the negotiating table and conduct a new round of negotiations on natural gas cooperation. This is also the eighth dialogue the two sides have conducted so far.

According to the Russian “Izvestia” report, the delegation led by Alexander Medvedev, vice president of Gazprom, has arrived in Beijing and will negotiate with the Chinese on the price dispute over natural gas cooperation.

The report pointed out that after a long period of confrontation, Russia's natural gas wellhead ex-factory price is 250 US dollars per 1,000 cubic meters, the previous negotiations, the Russian quoted price is 350 US dollars per thousand cubic meters. In contrast, although the offer price of Russia has fallen sharply, the price of US$250 is still the upper limit that China can accept.

“The US$250 is still unacceptable. The Russians are referring to the wellhead ex-factory price. If you add the cost of transportation, China will have to bear very high costs. This is particularly a long-term project with large contracts.” Expert reporter said when interviewed by this reporter.

He said that although the general direction of Sino-Russian energy cooperation has become increasingly clear, the specific details of cooperation require the same complex problems.

The price dispute continues to fall for the price of USD 250 to Russia, but the price that China hopes to reach is less than US$200. Even if Russia lowers US$100 per 1,000 cubic meters on the original basis, for Chinese oil companies that need to account for operating costs, 250 The dollar's offer will still make it face huge losses.

It is understood that at present, the domestic ex-factory price of onshore natural gas is 1,155 yuan per 1,000 cubic meters, and there is a gap of approximately 40% from the price quoted by Russia. If the cost factors such as pipeline transportation are taken into account, Russian natural gas will enter the domestic market. After the price may climb to 300 US dollars or even higher.

“We cannot simply look at the pricing results. In fact, as a domestic supply-driven energy product, China and Russia need to comprehensively measure various factors in the pricing of natural gas.” Macroeconomic Research Department, Ministry of Economic Information, National Information Center Deputy director Niu Li said when interviewed by this reporter.

"The introduction of natural gas from the international community will definitely lead to an increase in costs. After entering the domestic market, the people will have to pay. Since the import price is higher than the domestic price, the country will need to establish an average price." The original director of the National Development and Reform Commission Energy Institute accepts this book. An interview with the reporter said.

At the same time, NIU Li further pointed out that at present, as a domestic supply-driven energy product, the natural gas consumer market still has plenty of room. From a long-term perspective, the introduction of Russian natural gas must consider the overall economic benefits in the future.

“Now how much of the domestic natural gas market can be digested, if the high-priced imports, the country will have to lose a large sum of money.” Niu said.

At the same time, referring to other import prices is also one of the factors that both parties need to consider appropriately. The reporter learned that at present, the natural gas imported from Turkmenistan through the second line of the West-East Gas Pipeline, plus the transportation fee is 2,150 yuan per 1,000 cubic meters, and the price of natural gas imported from Iran and Australia is also far below the Russian quotation.

“The agreement we hope to reach is less than US$200, but there is still a gap between this and Russia’s requirements. They are mainly based on the price of natural gas sent to Europe,” said the expert.

The new plan is expected to come out. China is very likely to continue to provide Russia with **, or set up a joint venture to break the stalemate between the buyers and sellers on the transaction price has allowed gas negotiations to take time, and to break this stalemate, the Chinese and Russian sides may unfold New ways of cooperation.

“The Russia’s initiative to reduce price talks to China is a signal. For a long time, Russia’s toughness has caused twists and turns in the Sino-Russian negotiations, but this time the situation is different.” said the industry experts concerned about the progress of the negotiations.

Whether it is the Chinese who wish to cut prices or Russia, which is reluctant to let go, after years of "treating", both sides seem to have reached an inflection point in search of a breakthrough.

A researcher from the Oil and Gas Resources Strategic Research Center of the Ministry of Land and Resources told the reporter that both leaders hope that the Sino-Russian gas agreement can be finalized this year, and that the Russian delegation’s visit to China should be able to negotiate for a long time. Achieve a new leap forward. "If you cannot achieve unity in price, you can only rely on cooperation in other ways."

In order to further promote the negotiation process, China is very likely to break the deadlock in the negotiations by continuing to provide Russia with corruption or establishing joint ventures.

It was learned that PetroChina and Rosneft had previously established a joint venture, Eastern Energy, which is currently continuing exploration and research work in two oil and gas blocks in Irkutsk region. Another joint venture- — Dongfang Petrochemical's Tianjin refinery construction has also progressed smoothly.

“In terms of natural gas prices, both parties have adopted their own words. It is very difficult to reach an agreement at present, but cooperation in the energy sector will play a very beneficial role in the negotiation of natural gas,” the researcher said.