China’s natural gas demand has been growing as the government seeks to move away from coal in favor of cleaner fuels. According to EIA’s International Energy Outlook 2013 (IEO2013) Reference case, demand will more than triple from 5.2 Tcf in 2012 to 17.5 Tcf by 2040.
Russia’s largest natural gas company, Gazprom, finalized a deal with the Chinese National Petroleum Corporation (CNPC) in May. Under the first phase of the new 30-year contract, Russia will supply China 38 billion cubic meters (bcm), or 1.3 trillion cubic feet (Tcf), per year of natural gas starting in 2018. Future phases could increase this volume to as much as 60 bcm (2.1 Tcf) per year. The contract links the natural gas price to international crude oil prices and operates as a take-or-pay scheme: the buyer, CNPC, must pay for the contracted natural gas even if it decides not to receive it.
New natural gas production in Russia will mainly come from fields in eastern Siberia, which currently lack export infrastructure. The planned Power of Siberia pipeline will export gas south to China and east to a liquefied natural gas (LNG) plant on Russia’s east coast.