Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Russia's Weakened Hand Could Pay Off For Beijing In Major Gas Deal

Politics / Natural Gas May 21, 2014 - 12:51 PM GMT

By: OilPrice_Com

Politics A major gas deal between Russia and China could finally be sealed this week when Russian President Vladimir Putin visits China on May 20-21 and meets with President Xi Jinping. In the lead up to Putin's arrival, the two sides have been working on putting the finishing touches on a 30-year contract for a gas deal a decade in the making, and Russian officials have suggested that the deal will be completed by Putin's arrival.


Gazprom's CEO Alexei Miller announced on a Russian news show last weekend that Russia and China were "one digit" away from finalizing the agreement. "There is just one question - it's ... a starting, base price in the price formula which, it's remarkable, has already been fully agreed upon with our Chinese partners," he said on May 17. "It's a very little more - to put in only one digit, and a 30-year contract to supply 38 bcm of gas from East Siberia to China will be signed," said Miller.

38 billion cubic meters (bcm) of natural gas is equivalent to one-quarter of China's current gas consumption. The contract begins in 2018 and runs through 2048.

To get the gas into China, Russia plans on building a $23 billion pipeline that will span the length of Russia, just north of the Chinese border. It will connect with China at four points – one near where the borders of China, Kazakhstan, Mongolia and Russia meet, and three more connections much further east, including one at Vladivostok.

The negotiations have taken so long mostly because neither side wanted to give in on price. China was looking for similar or better pricing than what Russia gives to Europe, which would be between $10 and $11 per thousand cubic foot (mcf). For years, Russia held out for a higher price, but the crisis in Ukraine has weakened Russia's hand. Gazprom gets about 80 percent of its revenue from selling gas to Europe, and with Russia's relationship with its western neighbors deteriorating quickly, Russia needs other markets. That has it looking east.

China has gained even greater leverage over the years from working with Turkmenistan on natural gas supplies. China already receives about half of its natural gas imports from Turkmenistan – 20 bcm – and the two sides agreed last year to triple the volume to 65 bcm by 2020.

So while Russia was waiting for China to cave, the Middle Kingdom was finding alternative suppliers.

Moreover, not only is Russia feeling exposed by its dependence on a European market that could shrink in the coming years, but it is also in a race against the clock to meet rising Asian gas demand. That's because a lot of liquefied natural gas capacity is set to come online in over the next three to five years; both Australia and the U.S. have ambitious plans to send LNG to Japan, South Korea and China. Russia is in a much better position geographically to meet that demand, but it would need to accelerate building pipeline capacity and liquefaction terminals before Australian and American companies beat them to the punch.

All this is to say that China has capitalized on Russia's vulnerability, and before the last "i" is dotted on the gas contract, Beijing might have what it wants.

If that happens, it would be a major concession by Russia. As Steve LeVine notes over at Quartz, the $10-$11/mcf price Russia may agree to would be below the $12/mcf that Gazprom needs to merely break even.

For the deal to go through, China might have to pay a large amount upfront instead of over 30 years. Investors continue to pull billions of dollars out of the Russian economy in the response to the crisis in Ukraine, so Moscow could use Beijing's money.

Source: http://oilprice.com/Energy/Energy-General/Russias-Weakened-Hand-Could-Pay-Off-For-Beijing-In-Major-Gas-Deal.html

By Nicholas Cunningham of Oilprice.com

© 2014 Copyright OilPrice.com- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules