China-Russia drive energy megaprojects

Gas as a ‘transition’ fuel for coal phase out

China is shifting from coal to natural gas as part of its drive to achieve carbon neutrality by 2060. Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University recently said that gas was seen as an effective “bridge fuel” between coal and renewables for China.

China’s annual gas consumption is expected to reach 620 billion cubic metres by 2040 according to Sinopec Group, one of the largest integrated energy and chemical companies in China.

Dongsheng – News on China reports that China-Russia trade grew 35.8% in 2021, hitting record high of US $146.88 billion driven by energy megaprojects worth US $93 billion.

In 2014, Gazprom – Russia’s majority state-owned energy corporation – and the China National Petroleum Corporation signed a US$400 billion deal to build the Power of Siberia-1 pipeline, a 2,200km route connecting northern China with gas fields in eastern Siberia. The Pipeline was launched in late 2019 and is planned to supply China with up to 38 billion cubic metres of gas a year once it reaches full capacity in 2025.

In December 2019 Russia started pumping gas to China through the Power of Siberia-1 gas pipeline, also known as the eastern route. Russian President Vladimir Putin and Chinese President Xi Jinping took part in the launch ceremony via teleconferencing. 

According to media reports, Russia and China have long considered building a second “Power of Siberia – 2 pipeline” which could more than double Russian gas exports to China. Agreement was reached in late 2019 to China’s preferred route, which would deliver gas directly to densely populated regions of central China through Mongolia. In October 2021, the Mongolian government and Gazprom reached agreement on the route for the Mongolian portion of the Power of Siberia-2 pipeline, with construction work for the pipeline believed to start in 2024. 

Strategic implications for China and Russia

Chinese strategists have warned for over two decades that the country’s heavy reliance on maritime imports of energy resources made it vulnerable to a potential blockade by the US.

According to Lin Boqiang at the China Institute for Studies in Energy Policy, China can help mitigate that risk is by getting more of its oil and gas from Russian pipelines. “The fact that Russia and China have a common border provides a more secure route for transporting gas than by sea,” Lin said.

Commentators have noted that new gas pipeline to China will draw on the same gas fields with which Gazprom supplies European countries, including major economies such as Germany.

This would give Russia an alternative market for its gas. Alexander Gabuev, a senior fellow at the Carnegie Moscow Center, noted that China would “not replace all deliveries to the European market, [but] it can take care of a significant chunk – at least one third.”

See also: China Environment, 1 January 2022, Kelvin Kwok‘s excellent photo essay “West-East Gas Pipeline: Journey to the East” previosly re-published by China Environment