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Mongolia’s prime minister has warned that construction of the Kremlin’s long-planned mega-pipeline linking Russia’s western gas fields with China is likely to be delayed, securing a new market for gas previously sold to Europe. This dealt a blow to the Russian government’s plans.
The so-called “Power of Siberia 2” pipeline, which would cross Mongolian territory, had been a priority for Moscow for more than a decade, but Europe restricted imports of Russian gas in response to a full-scale invasion of Ukraine. Since then, it has become even more important. In 2022.
Mongolian Prime Minister Lubsannamsulain Oyun Erdene previously told the Financial Times that he expected construction of the 3,550-kilometer pipeline, including 950 kilometers through Mongolian territory, to begin in 2024. . Asked whether his partner countries would stick to that schedule, he said Russia and China had agreed. Key details of the mega-infrastructure project have yet to be agreed upon.
“Both countries still need time to conduct a more detailed economic study,” Oyun Erdene said in an interview, adding that the world gasoline price record for the past two years had been subject to complex negotiations. He said: “The Chinese and Russian sides are still making calculations and calculations and working on economic interests.”
Russian Deputy Prime Minister Alexander Novak told state magazine Energy Policy on Thursday that the construction period will be finalized after signing a binding agreement with the Chinese partner.
Russian President Vladimir Putin and Chinese President Xi Jinping met at least twice last year, but while Russia has repeatedly emphasized its readiness to launch the PS-2, Beijing has remained conspicuously silent.
China is already receiving gas from eastern Russia through the first Power of Siberia pipeline, which began operating in 2019. It transported around 23 billion cubic meters of gas last year and is expected to reach its full capacity of 38 billion cubic meters in 2025.
PS-2 will bring an additional 50 bcm of gas to China from fields on the Yamal Peninsula in Western Siberia, which previously supplied Europe. Russian state Gazprom began a feasibility study on the project in 2020 and hopes to have the pipeline operational by 2030. The hope is that China will replace Europe as the largest export market for gas. Europe used to buy more than 150 bcm of Russian gas a year, but since the February 2022 invasion, that amount has declined.
Sergey Vakulenko, a former strategic director at Gazprom Neft and a senior fellow at the Carnegie Endowment for International Peace, said Russia has offered China more financial advantages than it achieved in the PS-1 contract signed globally in 2014. He said it was likely that he was seeking conditions. Gasoline prices have become much cheaper.
The terms of the PS-1 contract have not been made public, but Bakulenko’s analysis of Chinese government payment data shows Russia will be paid significantly less than Turkmenistan and Uzbekistan, which also supply gas to China. It has been suggested that.
“On the one hand, for the Chinese this is a given, they should have this gas. On the other hand, there is also Russia, which has a lot of gas stuck and is asking for better conditions.” , said, “I think it’s a bit of a horse trade at this point.”
China’s Foreign Ministry did not comment directly on the negotiations, but said natural gas was an important aspect of Sino-Russian energy cooperation.
“The two countries have consistently cooperated in the natural gas sector based on the principles of mutual respect and mutual benefit,” the ministry said in a statement to the FT. Gazprom and the Kremlin did not respond to requests for comment.
Wei Xiong, senior analyst at Rystad Energy in Beijing, said China’s local industry is still looking forward to PS-2 coming online in 2030 to meet China’s growing demand.
“Regardless of the price [for piped gas] Although it has increased over the past few years, it is still much lower than LNG imports,” he said, referring to liquefied natural gas that arrives in China by boat from countries such as Australia and Qatar. “In the long term, China needs both to maintain diversification of gas supplies. This is a very important part here.”
Prime Minister Oyun Erdene said he met with the prime ministers of Russia and China in the Kyrgyz capital Bishkek in October. “We are still in talks with both countries and are ready to begin construction as soon as both sides are ready to begin.”
Mongolia, a landlocked country sandwiched between China and Russia, is also working to encourage investment from other countries to diversify its economy and act as a buffer against China and Russia. In June, it signed a trilateral agreement with the United States and South Korea to cooperate in areas such as mining and energy security.
UK-listed Rio Tinto operates the Oyu Tolgoi copper mine, the country’s biggest foreign direct investment, while Orano, backed by the French government, aims to develop Mongolia’s first uranium mine.
“We always support cooperation between other countries,” said Oyun Erdene, who made official visits to Beijing and Washington in 2023.
Additional reporting by Edward White, Ding Wenjie, Max Seddon, and Anastasia Stognei