What It’s All About: Russia, China Begin Construction Of World’s Largest Gas Pipeline
Submitted by Tyler Durden on 09/01/2014 18:12 -0400
If after months of Eurasian axis formation, one still hasn’t realized why in the grand game over Ukraine supremacy – not to mention superpower geopolitics – Europe, and the West, has zero leverage, while Russia has all the trump cards, then today’s latest development in Chinese-Russian cooperation should make it abundantly clear.
Overnight, following a grand ceremony in the Siberian city of Yakutsk, Russia and China officially began the construction of a new gas pipeline linking the countries. The bottom line to Russia – nearly half a trillion after China’s CNPC agreed to buy $400bn in gas from Russia’s Gazprom back in May. In return, Russia will ship 38 billion cubic meters (bcm) of gas annually over a period of 30 years. The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world’s largest fuel network in the world.
As BBC reports, “the deal will lessen Russia’s dependence on European buyers, who have imposed economic sanctions because of the crisis in Ukraine.” That is not news and has been known for months ever since the long-anticipated Holy Grail deal was signed in May. More importantly, as Zero Hedge reported last week, one awaits as the invoices become increasingly less denominated in USD, and more in CNY or RUB. Most importantly, and confirming the significance of Russia’s pivot away from Europe, which ultimately can have Qatar’s gas it so very desires, irrelevant how many thousands of innocent people have to die, the construction ceremony was attended by Russian President Vladimir Putin and Chinese Vice-Premier Zhang Gaoli.
China will start work on the construction of its side of the pipeline in the first half of 2015, Mr Zhang said.
The first gas will be pumped from Siberia to north-east China in early 2019.
Over the past 10 years, China has used other gas suppliers. Turkmenistan is now China’s largest foreign gas supplier. Last year, it started importing piped natural gas from Myanmar.
Increasingly it appears that China will defer to Russia when it comes to cementing bilateral commodity deals, especially if it means further distancing both sides from what has emerged as a natural foe to both aspirational nations: the United States.
Here is what Putin had to say about the latest gas pipeline, soon to be the world’s largest, during the groundbreaking ceremony outside the city of Yakutsh, via RT: “The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and above all – our key partner China.”
“Once we create a gas pipeline network here in the Far East and Siberia, we will be able to connect European pipeline system to the East. And this, in terms of export opportunities and expanding Russia’s ‘gasification’, is very beneficial. Depending on the situation in world markets, we can more effectively implement gas flows- either more to the West or to the East,” Putin told students at North-Eastern Federal University earlier on Monday.
More:
Both President Putin and Vice Premier Zhang Gaoli signed the freshly-welded pipeline in a time-honored Russian tradition. The ‘Power of Siberia’ was welded together by workers from Chayanda gas field, overseen by CEO Aleksey Miller.
“Gazprom is always a reliable supplier of gas to its customers – which also applies to the ‘Power of Siberia,” Miller said.
The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world’s largest fuel network in the world. Both Putin and Vice Premier Zhang Gaoli have called the project the world’s largest construction project, as investment from both countries will be more than $70 billion.
“The gas pipeline ‘Power of Siberia’ will increase energy security and ensure Russia’s ability to fulfill export obligations,” Putin said in the opening remarks.
Starting in 2019, Power of Siberia will pump gas from Siberia to China’s populous northeast region as well as to Russia’s Far East. The Chinese side will start the construction of its part of the pipeline in the first half of 2015, the Vice Premier of China said.
Last year, China consumed about 170 billion cubic meters of natural gas and expects to consume 420 billion cubic meters per year by 2020. Europe still remains Russia’s largest energy market, buying more than 160 billion meters of Russian natural gas in 2013.
So while the west is no longer able to find any growth opportunities, with the marginal free cash flow dollar increasingly going in stock buybacks, Russia has no such problems: running from the Chayanda gas field in the Republic of Yakutia, the cost of construction is estimated at more than $20 billion (770 billion rubles), which includes other investment in the region of $7.5 billion (283 billion rubles). Russia’s largest steel pipeline manufacturer, TMK, will provide materials for the project.
The gas pipeline will become a common transit center for gas production centers in the Yakutia and Irkutsk regions.
The first stage of the project will be to transport gas from the Chayanda deposit in Yakutia and connect to the town of Blagoveshchensk on the Chinese border. The 968 km pipeline should be completed by 2018.
The Chayanda field, which will begin production in 2015, is estimated to have reserves of 1.2 trillion cubic meters in gas and 93 million tons of liquid hydrocarbons. Each year the field is expected to produce up to 25 billion cubic meters of gas and at least 1.5 million tons of oil.
Putin also said that China can become a shareholder in the Vankor oil and gas fields in the Krasnoyarsk region in Eastern Siberia. China will enter into a strategic relationship with Rosneft, Russia’s largest oil company, which owns the field.
But, Obama keeps repeating Russia is isolated by the entire world… Is he once again simply, gasp, lying?
To summarize all of the above: while Europe will continue to depend on Russia for its gas imports indefinitely, Russia will no longer depend on Europe for its experts.
What else is new? Russia has vast natural resources. China is already an over-populated cess pool.
Now they’ll all be driving SUV’s. I don’t see there traffic problems abating anytime soon.
Where is China going to get the $$ to pay for it? The American economy has long been the engine that drove the world’s economies. That hasn’t changed.
The only thing this oil deal is going to provide is a few more billionaires in Russia, and a few more play toys for the Chinese elite.
If China is able to buy the oil, what then will they do with it, Americanize? What other model do they have to follow. If America’s carbon footprint is unsustainable, the Chinese strategy is a bit short sighted.
If, indeed, it’s all about the oil and energy, the US was never going to control Russian oil anyway, so we’re back to the ME and Ukraine, and the oligarch’s get a few more years to amass wealth.
As obama golfs and worries over minimum wages here in this country. The world moves on.
My thoughts as well HM, in this country the liberal politicians and population are more worried about social issues than world issues.
On POTUS (Sirus radio political news) this morning the question of the day was how republicans were going to fare in the mid terms concerning the senate.
A political annalist was claiming not so well because they don’t address social issues such as same sex marriage, or raising minimum wages to a living wage. Mind boggling at what this once great country has devolved into.
Wow, China has been busy with the USD’s they amassed by accepting our jobs and production. Who’ld thunk it?
China has been running around dumping USD’s by the ton, buying up rare-earth minerals, along with rights to our current crop of natural resources.
So, we traded our middle class jobs for less pollution and richer 0.1% (and politicians), freaking spectacular!
Everyone in the world is preparing for the end of the USD reserve system. Well, everyone except us ‘murkins, we insist on believing the same guys that stole our middle class.
The wheels on the bus are flying off, and we still refuse to see.
Echo TE.
And did our elite not anticipate this in the 90s when they couldn’t move our manufacturing and jobs to China quickly enough?
And could our greedy and short-sighted business and political honchos also not foresee that, when China had finally soaked us for all our markets and our money, that the friendly mask would drop and their thug Communist government would suddenly grow very unaccommodating….as I personally predicted it would back in the 90s?
Hey folks, they no longer need our failing companies, our tapped- out consumers…….. or our government bonds.
Inasmuch as we have, over the past 2 decades, handed them our technological know-how, including “sensitive” military technologies, they no longer need us for anything at all, and they are now arming themselves rapidly, while forging alliances with the countries we’re determined to make into our enemies.
Many recent articles- here is just one:
http://articles.economictimes.indiatimes.com/2013-12-27/news/45626854_1_state-media-ndrc-foreign-companies
Future historians will puzzle for a long time, trying to figure out just what mass psychosis afflicted the country that was once the richest, most innovative, most creative, and most productive country with the highest standard of living for the greatest number of people… and compelled it to commit suicide.
That’s what we have done, folks. If we had deliberately decided, 20 years ago, that as a nation we were going to commit suicide, and destroy our economy, leaving us vulnerable to all the people of the world we’ve made hate us, we could not have done a better job of it.
Chicago says, “…Future historians will puzzle for a long time, trying to figure out just what mass psychosis afflicted the country that was once the richest, most innovative, most creative, and most productive country with the highest standard of living for the greatest number of people… and compelled it to commit suicide…”
Only thing I can’t agree with you on.
The winners right history. We will be portrayed as evil, baby-eating, landwhales and our PTB will not be blamed. After all, we “voted” for this shit.
That’s a fun game to play. Take a world event and try to write the future entry in a child’s history book. Look at the situation from the eventual winners’ eyes.
By reading foreign news it becomes apparent that we are not going to be viewed as sick/psychotic, we will be viewed as ultimate evil.
Exactly the same way we were taught concerning Native Americans, Russians, Nazis, and the like.
Scary stuff, no?
The mass psychosis is one of the “7 Daedly Sins”, Greed. The greed of the Elite, willing to sell out their own country for a pile of money that will, in the end, not save them.
Anyone who thinks the Chinese government is not capable of nationalizing every foreign-owned entity in a New York nanosecond, is delusional.
I sense that PRC leaders only await the moment when we are so weakened financially and economically, and our allies have either collapsed or deserted us, to drop the hammer on American, European, and Japanese enterprises with assets in the PRC.
The US isn’t going anywhere, and the Chinese aren’t going to do a damn thing.
Even on their worst day, the US controls half the world. Do you think they care what the other half thinks about them?
Apparently not, because we bomb the living shit out of them.
I’m still curious what China is going to do with the oil, their environment is already in the toilet. Hopefully, neither we nor the Chinese are stupid enough to enter an arms race.