Natural gas pricing agreement with Russia close

China Daily, January 20, 2011

China may reach an initial agreement with Russia on natural gas pricing - a subject of great contention for years - by the middle of 2011, industry experts close to the matter said.

"We've seen that the price gap has narrowed during the past several months. And we're cautiously optimistic that the initial price disagreement will be solved in the first half of 2011," said Wan Chengcai, director for the Russian Foreign Relations Development Research Center under the State Council.

The two countries signed a natural gas contact as early as 2006, when they agreed to construct two pipelines to transport a total of 70 billion cubic meters (cu m) of the fuel annually from Russia to China.

The first pipeline is expected to become operational this year. But disagreement on the pricing of natural gas has stalled negotiations for several years.

China has strengthened its cooperation with Russia, the world's largest energy producer since 2009, in terms of exploration and supplies of crude oil and natural gas.

The first pipeline linking Siberia in Russia and China's Daqing oil field, in the northeast of the country, started operating on Jan 1. The 16 billion yuan ($2.42 billion) pipeline is expected to carry 15 million tons of crude oil annually from Russia to China for 20 years.

"The operation of the oil pipeline is just the beginning of the countries' cooperation in the energy sector, and a deeper and broader partnership can be developed afterwards," said Huang Xiaoyong, vice-president of the Graduate School of the Chinese Academy of Social Sciences.