Russia Fails to Sign China Gas Deal at Shanghai Meeting

[Benton D Struckcheon]

Source: Bloomberg News

The presidents of China and Russia failed to sign a $400 billion gas supply deal at a meeting today in Shanghai, prolonging negotiations that started more than 10 years ago.
...
Russian officials said before the meeting that the two sides were very close to a deal on gas price, opening the way to building a pipeline linking the world’s largest energy producer with the biggest consumer. That has been the stumbling block throughout the past decade, though with Putin facing sanctions from the U.S. and Europe after he annexed Crimea, an agreement had been seen as more likely than at previous summits.
...
“If the Russia-China gas deal isn’t signed in the near-term, the window of opportunity may be closing fast as other supply sources enter the market,” Xizhou Zhou, director of China Energy at IHS Inc., a consultant, said before today’s meeting.
LNG projects in Australia will begin operations next year, making global gas supply “much more abundant,” according to Zhou.

Read more: http://www.bloomberg.com/news/2014-05-20/russian-chinese-leaders-silent-on-gas-deal-in-shanghai.html

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As has been the case for 10 years, price is the sticking point.

[onehandle]

1. Bomb Their Ass And Take Their Gas!

Sorry. Couldn't resist.

[Benton D Struckcheon]

3. Catchy. Sounds like something McCain could use for his next party... n/t

[jakeXT]

2. Price in which currency ?

VTB Bank and Bank of China today signed an Agreement on Cooperation in the presence of Russian President Vladimir Putin and Chinese President Xi Jinping.

The agreement was signed by First Deputy President and Chairman of VTB Bank Management Board Vasily Titov and Bank of China President Chen Siqing.

Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions.

Vasily Titov said :”The signing of the agreement underscores VTB Group’s ongoing drive to grow its business in Asia, and will help facilitate the development of bilateral trade and economic relations between Russia and China, which have always been reliable partners.”

http://www.vtb.com/group/press/news/releases/386232/

[pampango]

4. That's a surprise. Linking "the world’s largest energy producer with the biggest consumer" seemed

like a natural fit for each other. Plus it is a good time for Russia to diversify away from a dependence on the European market.

Russian officials said before the meeting that the two sides were very close to a deal on gas price, opening the way to building a pipeline linking the world’s largest energy producer with the biggest consumer.

Perhaps this deal falling through saves the world from another oil pipeline, anyway.

[geek tragedy]

5. Russia is finding that it doesn't have a lot of leverage with China,

and that the price is moving consistent with that dynamic, no doubt.

It is not much fun to be the junior partner for a former superpower.

[former9thward]

18. Well that is one spin.

Now they have signed the deal what is the next one?

[Benton D Struckcheon]

6. They're negotiating on a pipeline for natural gas, not oil.

I didn't bother to research it for this, but if I remember correctly Gazprom needs a pretty high price to break even, which may be what is holding this up.

[freshwest]

7. Even with that, I don't see how Australia can compete price wise.

[Benton D Struckcheon]

9. Dunno. What's Australian NG cost?

Basically, it's how easy it is to get out of the ground. Of course they do have to liquify the stuff, so you may have a point.

[freshwest]

14. I'm thinking mainly of land transport. Russia and China

share thousands of miles of border. China needs it for growth and Russia needs the money.

IDK why they haven't struck a deal after 10 years. It's possible, since China is going solar, fossil fuels aren't as vital as they once were.

People are tired of being forced to dance to the tune of the oil oligarchs. I welcome that day and it'll be better for the environment to not cross as much water as the route from Australia to China. I think oil tankers shipping across oceans is stupid.

That being said, most of the border of Russia and China is natural and that pipeline would be crossing rivers. We have that in the USA, too. Dammit all.

[yurbud]

8. I'm divided: the pipeline would mean more pollution but probably less war

mostly, I'm against war.

[joshcryer]

11. Natural gas, in theory, pollutes less.

The problem is that it only does so if it is paired with renewables, which, unfortunately, China isn't going to build up very significantly.

[Sunlei]

10. China plays hardball now for Russias gas. 10 years? they may not sign at all "other supply sources"

Or China could just make gas from all their garbage and go solar/wind/water power.

[geek tragedy]

12. Russia needs China, China does not need Russia.

Pooty Poot undermined his own negotiating position with the Chinese by fucking with Ukraine.

[yurbud]

13. China might need Russia slightly less, but it still needs them

If we succeed in further breaking Russia, China will be next in our sites, and our negotiating strategy with them will be more like dictating terms, as the IMF does with all weaker countries.

[geek tragedy]

16. China and the US are not in the position to dictate terms to one another.

They are an economic superpower, as are we.

If China had to choose between access to Russian gas and access to the US consumer market, it would not be a difficult choice on their part.

[Sunlei]

15. yes I know.China is probably their biggest customer for gas left now cause Putin messed up bad /w EU

[Benton D Struckcheon]

17. Deal done, price not disclosed

A little arithmetic was done below, but it is speculative:

There's no arguing over the size of the deal, but it is far from clear who will make how much money from it. Russian news agencies quoted Gazprom CEO Alexei Miller as putting a $400 billion tag on the overall value of the contract, which will run for 30 years. However, he said the pricing of the deal "is a commercial secret." A rough calculation dividing $400 billion over 30 years of supplies would give a price of around $350 per 1,000 cubic meters, fractionally below the $360 that Europe paid on average last year, according to the newspaper Vedomosti. However, the big difference is that Gazprom will first have to build a new pipeline from its fields in eastern Siberia, which Vedomosti said could cost $30 billion.

http://features.blogs.fortune.cnn.com/2014/05/21/china-russia-reach-major-natural-gas-deal/