Natural gas pricing agreement with Russia close

China Daily, January 20, 2011

Russia's biggest natural gas export destination is Europe. However a trend through 2008 and 2009 saw demand for the fuel declining.

In the negotiations with China, Russia hoped to secure a price similar to that paid by its European customers, but China insisted on paying a lower price as it did with several Asian countries such as Turkmenistan.

"China is exploring closer cooperation with Russia in the field of natural gas. However, as the country's consumption power per capita lags far behind its counterparts in the West, the natural gas price is much lower and cannot compete with the West," Huang said.

China is expected to more than double the proportion of natural gas it consumes on an annual primary basis from the current level of 4 percent by 2020.

The country may consume 300 billion cu m by then, leaving a huge market for other overseas providers of the fuel to tap into.

"The cooperation between China and Russia in the energy sector will undoubtedly be increased. But the negotiation process in natural gas pricing may last for a long time, given that it involves the interests of both China as a nation and its companies. We hope the two nations can reach an agreement in the summer, and see more cooperation in the sectors of hydropower, nuclear power and coal," Wan said.