OAO Gazprom, the world's biggest natural gas producer based in Moscow, said it is in talks with China's largest oil and gas producer to export gas to China through a cross-border pipeline.

Of two possible routes the pipeline can take, Gazprom and China National Petroleum Corp (CNPC) are discussing "which has the priority," Alexander Medvedev, deputy chief executive officer of Gazprom told reporters at a press conference in Beijing yesterday.

The line might run through northeastern China's Heilongjiang Province or the Xinjiang Uygur Autonomous Region in the west, Medvedev said. Each has an annual capacity of about 30 billion cubic meters (bcm) a year.

"We are discussing figures of between 20 and 30 bcm for each project," Medvedev said.

Sources said the western route is expected to link with China's internal East-West pipeline, which will transport 12 billion cubic meters of natural gas from the Tarim Basin in Xinjiang to Shanghai, some 4,000 kilometers away.

The two lines are being "carefully analyzed on both sides," Medvedev yesterday told reporters.

A CNPC official, who declined to be identified, yesterday told China Daily the two companies are "in close contact" over the issue, but declined to comment further.

Wang Jianing, representative office advisor of OAO Gazprom Beijing, yesterday said negotiations are still at the preliminary stage, and price has not yet been discussed.

The Russia and China portions of the pipeline will be constructed by Gazprom and CNPC respectively, Medvedev added.

But Gazprom would be interested in investing in China's pipeline infrastructure if Beijing backed the move, he added.

Recognizing the soaring demand for energy in Asia, state-controlled Gazprom is exploring new markets to secure its gas export growth forecast of 6.4 percent this year, Medvedev added.

Gazprom, supplier of a quarter of Europe's gas needs, expects gas exports to rise to 149.5 bcm this year, excluding shipments to ex-Soviet republics, and to be worth as much as US$27 billion. The export volume is expected to reach 155 bcm next year, Medvedev said.

Gazprom officials said the company has not determined which gas fields to use for the China exports.

But Medvedev said Russian gas fields in eastern Siberia currently have the potential to export 65 to 75 bcm to Asia-Pacific markets.

Gazprom is also in talks with China's third-largest oil and gas producer, China National Offshore Oil Corp (CNOOC), about supplying liquefied natural gas (LNG) to CNOOC's LNG terminals, Medvedev said.

Currently most of Gazprom's LNG supplies go to the United States.

Medvedev also showed keen interest in a partnership with PetroChina and Sinopec in any potential LNG project.

China, the world's second-largest energy consumer after the US, is vigorously pushing the consumption of cleaner-burning natural gas in a move to cut its heavy reliance on coal and oil. Natural gas is set to account for 8 percent to 10 percent of China's total energy consumption by 2020 from the current 3 percent.

But China has not yet secured sufficient domestic natural gas reserves.

Industry analysts predict the country is estimated to fall short of its natural gas needs by some 80 billion cubic meters by 2020.

To meet the demand, China is considering buying piped gas from its neighbors such as Russia and countries in Central Asia, and importing LNG into coastal areas.

China and Kazakhstan are studying the possibility of building a pipeline to deliver natural gas from western Kazakhstan to the Xinjiang Uygur Autonomous Region on China's western border.

Han Xuegong, a senior analyst with CNPC, said each line has its strengths, but the close business relations between CNPC and Kazakhstan oil companies might make the Sino-Kazakhstan route more feasible.

Not Entirely Dependent on Imports

Nearly 67 percent of China's energy needs are met by coal. The ratio of petroleum in its energy consumption structure is about 24 percent.

However, this doesn't necessarily imply that China is entirely reliant on imports to meet its energy needs. 

Zhang Guobao, vice chairman of the National Development and Reform Commission (NDRC), China's economic planning agency, said that as a big coal producer, China satisfied 94 percent of its energy consumption last year with domestic supplies.

In 2004, China produced 1.96 billion tons of coal. Together with its oil, natural gas, and other energy resources, it produced a total of 1.85 billion tons of standard coal for primary energy, accounting for 11 percent of the year's global energy output, according to NDRC statistics.

(China Daily, Xinhua News Agency September 22, 2005)