The Pricing Debate over Russian Gas Exports to China

The Oxford Institute for Energy Studies has recently published a paper which concludes that agreement between Russia and China for pipeline gas exports may not be reached this year or even in 2012. The paper by James Henderson suggests that the Chinese have developed other gas import options from Central Asia, Myanmar and a range of LNG suppliers which mean they are not in a hurry to conclude a contract with Russia. On the other side of the border Gazprom does not want to compromise on the principle of oil-linked pricing on which it is insisting in its European export contracts. Both sides believe themselves to be in a powerful position without the need for compromise, but the paper suggests that if the first pipeline project could be located in Eastern Siberia – instead of the Altai line from Western Siberia which is Gazprom’s priority – then it would be easier to agree a price acceptable to both parties.

By: James Henderson

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