Exports to China via Far East Route to reach 10 bcm annually over 25 years

Oil and gas trade between China and Russia is expected to be further enhanced this year after Russia ratified the agreement with China on gas supply cooperation on Wednesday, said industry experts.

Russia ratified the intergovernmental agreement with China on the cooperation for natural gas supplies from Russia to China via the Far East Route after the Federation Council, the upper house of the Russian parliament, approved the ratification at a plenary session on Wednesday, according to Russian news agency TASS.

The agreement on natural gas cooperation was signed in Moscow and Beijing on Jan 31. It defines the conditions of cooperation via the Far East Route, including the transborder section of the gas pipeline across the Ussuri River near the cities of Dalnerechensk in Primorsky Krai, Russia, and the county-level city of Hulin, Heilongjiang province in China, it said.

According to Cao Lujia, an analyst with BloombergNEF, after the project reaches full capacity, Russia will send 10 billion cubic meters of gas to China each year over 25 years via the Far East Route.

"Total natural gas exports from Russia to China are set to total 48 billion cubic meters, including deliveries via the Power of Siberia gas pipeline," she said.

"The increase in Russian gas supply is going to compensate for the supply uncertainties coming from Central Asian countries when they have to decrease exports to prioritize their domestic gas needs, especially during the heating season."

Oil and gas trade between China and Russia is expected to be further enhanced this year with energy as the cornerstone of the cooperation, she added.

Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute, believes energy cooperation between the two countries is complementary, as Russia is a major oil and gas exporter while China is a major energy importer.

China's imports of Russian crude oil increased 8 percent year-on-year in 2022, the equivalent of 1.72 million barrels per day, according to Chinese Customs data, making Russia China's second-biggest supplier. Meanwhile, China's imports of Russian pipeline gas and liquefied natural gas last year soared 2.6 times and 2.4 times to $3.98 billion and $6.75 billion, respectively.

The document regulates civil law, tax and Customs issues of activities for the implementation of the provisions of the agreement and defines a mechanism for resolving disputes if they arise, according to TASS.

The agreement provides for the creation of an effective mechanism to implement the provisions of the contract for the sale of natural gas in the amount of 10 billion cubic meters on the Far Eastern Route between Saint Petersburg, Russia-headquartered PJSC Gazprom and China National Petroleum Corporation dated Feb 3, 2022 "on the principles of equality, mutual benefit and long-term cooperation", it said.