Will China still have enough for gas pipelines from Russia: The "Power of Siberia-2" has a competitor

Deputy Prime Minister Alexander Novak said that the process of working on a gas pipeline project to China through Kazakhstan has been launched. Experts believe that the route can become an alternative to the Power of Siberia —2 project, on which negotiations have not yet brought any result.

Gazprom is exploring the possibility of gasification of the north-east of Kazakhstan with the simultaneous construction of a gas pipeline to China.

"This process, let's say, has been launched. Calculations, feasibility studies are being carried out, negotiations are underway," Alexander Novak said yesterday. The Rossiya 24 TV channel cited data that the capacity of the gas pipeline will be 45 billion cubic meters per year, of which 10 billion cubic meters will be used for gas supply to Kazakhstan.

Such a gasification project of neighbors in Kazakhstan itself has been discussed at least since the summer of last year, when the country's Ministry of Energy held public hearings. Then the capacity of the RF—RK—PRC gas pipeline with access to China was estimated at 40 billion cubic meters per year, and its cost was $ 4.2−4.4 billion. It was planned that the highway would run from north to south along the eastern border of Kazakhstan along the Omsk—Pavlodar—Semey route with branches to Khorgos and Dostyk on the border with China.

In 2025, Gazprom should increase the "Power of Siberia" to the contracted 38 billion cubic meters per year, and in 2027 it will launch the Far Eastern route from the Sakhalin deposits — 10 billion cubic meters per year. At the same time, a real turn to Only the Kazakhstan route or the Power of Siberia —2 can become the East. They will be able to supply gas from the fields of Western Siberia, which are still a resource base for export to Europe.

Plans to build the Power of Siberia —2 through Mongolia to China have been talked about for five years. During this time, Gazprom has started design work, but there are still no real agreements on additional supplies of 50 billion cubic meters of gas per year with the Chinese side.

Experts tend to believe that the Power of Siberia—2 projects and through Kazakhstan are mutually exclusive. Moreover, in its original form, the Power of Siberia — 2, which was then called Altai, was supposed to be launched almost as per the project through Kazakhstan — only to the east — through the territory of Russia.

"In our opinion, the gas pipeline through Kazakhstan can really become an alternative to the Power of Siberia-2, since the scale of supplies is comparable," says Sergey Kaufman, an analyst at Finam. He estimates that the probability of the implementation of both gas pipelines is extremely low.

"Even taking into account the fact that China is expected to be the leader in gas demand growth in absolute terms in the next 10-15 years, two such large projects from one supplier are not needed even by the Celestial Empire in the current conditions," notes Sergey Kaufman.

Igor Yushkov, a leading analyst at the FNEB and an expert at the Financial University under the Government of Russia, agrees that there can only be one of the two projects.

"Another question is whether the gas pipeline project through Kazakhstan will encourage China to sign a long—term agreement. Construction will not begin until long—term gas supply contracts are signed," says a leading analyst at FNEB. — Gazprom has free capacity of 230 billion cubic meters per year and the question is not in volume (35 billion cubic meters or 50 billion cubic meters). Both routes have the same resource base from the Yamalo-Nenets Autonomous Okrug — the deposits of Western Siberia."

Alexey Grivach, Deputy Director of the National Energy Security Fund (NWF), believes that it is too early to draw conclusions.

"This is a very early stage to speak unequivocally. So far, this is an additional option for negotiations. Although I think that strategically the capacity of the Chinese market is very large, and Russian gas there is very competitive in terms of price and reliability," notes the deputy director of the FNEB.

The Kazakhstan project has a number of serious advantages, experts say.

"The choice of Kazakhstan may be due to the fact that the country has a much greater potential for its own gas consumption than Mongolia, through which the Power of Siberia—2 was supposed to go," says Sergey Kaufman, an analyst at Finam.

At the same time, Igor Yushkov, a leading analyst at FNEB, says that such a supply option is beneficial to Kazakhstan, as it removes part of the cost of building a gas pipeline from Russia.

"The attractive side of the gas pipeline may also be the fact that it can already be connected to the existing infrastructure — three lines of the gas pipeline from Turkmenistan to China, which have never worked at full capacity," adds Igor Yushkov.