Gazprom Plans to Build Pipeline to Supply China's Gas

Russia's Gazprom is close to finalizing its long-running talks on supplying gas to China, according to the head of the firm's export branch Aleksandr Medvedev.

Eighteen months ago Gazprom and the Chinese National Petroleum Corporation agreed in principal to the sale of Russian gas, but didn't agree on a price.

Within a year plans were in motion to begin the construction of a $14bn pipeline, all that was needed was an agreement on price from the Chinese.

Medvedev says China has started an experimental pricing mechanism in two provinces, allowing locals to buy gas at the price level Gazprom suggests. "If the result is positive I believe the Chinese government will take a quick decision on our proposal for a reasonable gas price", he added.

Gazprom official says the price of the gas sold to China should be about the level of the gas exported to Europe plus the export duty and the transportation cost. In 2011 the average exported gas price reached $436 per thousand cubic meters and Mr. Medvedev estimates the export duty and the transportation cost to be around $100.

The gas is to flow through the Altai pipeline, which connects Western Siberia gas deposits through to the Russian Far East, the western part of China and then connects to the Chinese East-West pipeline down to Shanghai.

Aleksandr Medvedev believes China will finally agree terms with Russia. "Actually we agreed about everything," he said, noting there are some small details left to settle "which will allow us to start the construction projects and upstream projects in Russia, and the Chinese could do their job in China."

Previously Pavel Oderov, the Head of Gazprom Foreign-Economic Department, said that in the medium and long-term China will be an attractive market for Russian natural gas. It is estimated that Russia will supply over 30 billion cubic metres of gas to China via the Altai pipeline. According to the official forecast of the Chinese government the country will need to import about 300 billion cubic metres of natural gas of by 2020.