China, Russia to Discuss Downstream, Upstream Interests in Gas Talks: Minister

China and Russia could adopt a new approach in negotiations over cross-border natural gas sales, Xinhua reported late Tuesday quoting Chinese Vice Minister for Foreign Affairs Cheng Guoping.

At a press briefing held together with Russian ambassador Sergei Razovin in Beijing, Cheng said that cooperation on gas was likely to involve integration of both upstream and downstream components for mutual benefit and diversify risks for both sides, Xinhua reported.

Talks are expected to resume when Vice Premier Wang Qishan meets Russian Deputy Prime Minister Arkady Devorko Albion on June 1 in Beijing.

Razov said the price of natural gas would not be lower than the price of oil Russia sells to China, the China Daily newspaper reported Tuesday.

China Daily too quoted Cheng as saying that energy cooperation would be a key topic during Russian President Vladimir Putin's visit to Beijing for the Shanghai Cooperation Organization Summit, which starts June 6.

China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan will participate in the summit that will focus on security and other mutual interests. Iran has been invited as an observer.

China and Russia had signed a memorandum of understanding on gas supplies in 2006, when they agreed to construct two pipelines to transport a total of 68 billion cubic meters/year of Russian gas over 30 years.

Of this, 30 Bcm/year would be sent via the western Altai route and the rest from East Siberia via an eastern route.

A source at state-owned China National Petroleum Corp. said the downstream aspect could refer to Russia's keenness to gain access to China's domestic gas distribution market while CNPC eyes upstream interests in Russia.

"There are not many barriers to the city gas distribution market for the Russians, but getting into the Russian upstream sector will entail plenty of political and regulatory risk," the source said.

In September 2010, Gazprom and CNPC signed a legally binding agreement on the supply of upto 30 Bcm/year of gas but negotiations have been bogged down by disagreement over price. A visit by Prime Minister Putin to China in October last year failed to make any breakthrough.

Talks resumed this year when a Chinese delegation led by Vice-Premier Li Keqiang visited Moscow in April and submitted a new plan, although no details are known.

Liu Tienan, head of the National Energy Administration, said in April that he was confident of reaching an agreement as the respective state-owned companies began discussions based on the new plan.

There was major technical progress on the two pipelines but the gas price remained a hurdle, he said.