Facing a Russian gas pipeline project “Siberian Force-2” Increasing challenges may hinder its implementation, after China insisted on obtaining Russian gas at a low price, which experts believe does not achieve the economic feasibility of the project, which represents a new setback for Moscow’s efforts to find an alternative to the European market after the war in Ukraine.
According to reports, Beijing is demanding to buy gas at a price of approx $50 per thousand cubic metresWhile analysts’ estimates indicate that Russia needs a price of no less than… $125 per thousand cubic metres To cover project costs and achieve the minimum economic return.
A strategic project faces a difficult test
Negotiations on “Force Siberia-2” have been going on for about ten years, a period similar to that which preceded the implementation of the line “Siberian Force-1”which became the main port for Russian gas exports to Asia after the cessation of pipeline supplies “Nord Stream” To Europe in 2022.
Although Russia succeeded in redirecting a large portion of its oil exports to Asian markets following Western sanctions, the gas sector faces greater challenges due to its reliance on pipelines, which require huge investments and long implementation periods.
The “Power of Siberia-2” project extends from the Yamal fields in northern Russia through Mongolia to northern China, with a design capacity of 50 billion cubic meters annually-Card comparison 35 billion cubic metres The “Power of Siberia-1” line is currently operating at full capacity.
Beijing sticks to its conditions
Moscow was hoping to make progress during Russian President Vladimir Putin’s recent visit to Beijing, but reports indicated that the Chinese side requested to postpone discussion of the project during the visit.
The dispute centers on the price of gas, as China seeks to obtain supplies at prices close to the subsidized domestic prices, which amount to about $50 per thousand cubic metres.
This price is much lower than the average price of Russian gas exported to China, which Moscow expects to reach $258.8 per thousand cubic metres During the current year, compared to about $420.2 For Gazprom customers in other markets, with an expected decrease to $223.9 Next year.
Analysts believe that the Chinese position goes beyond a commercial negotiation, as it imposes conditions that may make the implementation of the project economically unviable.
The project’s viability is at stake
Sergey Vakulenko, a researcher at the Carnegie Russia Eurasia Center and a former Gazprom official, estimates that the project would need a price of approximately $125 per thousand cubic metres At the Chinese border to cover its costs.
He confirms that the offer circulating from the Chinese side, if true, is difficult for Moscow to accept, and may ultimately lead to the freezing of the project that Russia is counting on to boost its gas exports.
Vakulenko also believes that expanding gas exports to China will not compensate for the revenues that Russia was achieving from the European market before the war, as his estimates indicate that net annual revenues may range between 2.5 and 4.3 billion dollarscompared to approx 20 billion dollars Previously achieved by gas exports to Europe.
The balance of power tilts in favor of China
The dispute reflects a change in the balance of power between the two countries, with Russia becoming more dependent on China as the largest remaining buyer of Russian gas, while Beijing continues to diversify energy sources through pipelines from Central Asia, liquefied natural gas imports, and the expansion of renewable energy projects.
This diversity gives China greater flexibility in negotiations, while Russia appears to be the party most in need of completing the agreement.
If Beijing continues to adhere to its price conditions, the “Power of Siberia-2” project may remain postponed, which will prompt Moscow to intensify its efforts to expand liquefied natural gas production and find alternative markets to dispose of its reserves, despite this requiring large investments and a long time before achieving tangible results.
