China's biggest oil firm and Russia's State-owned natural gas monopoly are expected to reach a consensus over the price for gas imported through two cross-border pipelines by the end of the year.

 

China National Petroleum Corp (CNPC), parent of overseas-listed PetroChina, and Moscow-based Gazprom, have reached an initial agreement to build two pipelines to transport up to 68 billion cubic meters (bcm) of Russian gas to China annually.

 

"We are in very detailed negotiations about the project, and pricing is currently the biggest hurdle, as the seller is always asking for more in the current bullish global market," a CNPC official engaged in the Sino-Russian talks told China Daily. "We expect to reach a final accord over the price by the end of this year."

 

However the official, who asked not to be named, did not rule out the possibility of further putting off the final pricing decision. "Anyway no one could predict exactly when the talks will be completed," he added.

 

He declined to comment on pricing details, saying they were confidential.

 

The two pipelines will end in Northwest China's Xinjiang Uygur Autonomous Region and Northeast China's Heilongjiang Province.

 

The western line, carrying West Siberian gas to Xinjiang, with an annual capacity of 30 bcm, will be the first to be completed, with work finished by 2011.

 

It will connect with the country's US$5.2-billion West-East Gas Pipeline, extending from Xinjiang to the eastern coast, a China News Service report said last Wednesday, citing Li Xianglin, Communist Party Secretary of the Altay region in Xinjiang.

 

On the eastern side, the pipeline will draw gas from Gakhalin, bypassing Russia's Far East region to reach Heilongjiang in the northeast, Alexei Miller, chief executive of Gazprom was quoted as saying last week.

 

Oil and gas majors from the neighboring countries are deepening cooperation as leaders in China and Russia are pushing for more bi-lateral energy partnerships.

 

Both nations signed a string of framework agreements to strengthen collaboration over oil, gas, refining and oil product sales, when Russian President Vladimir Putin made his official visit to China in March.

 

China's biggest oil refiner, Sinopec Group, is buying 97 percent of the Udmurtneft assets of TNK-BP.

 

Sources also say China National might purchase up to US$3 billion worth of shares in the initial public offering (IPO) of Russian state-owned oil group Rosneft.

 

Meanwhile, in a move to diversify the nation's energy mix and cut the reliance on coal and oil, the Chinese Government is pushing the use of cleaner natural gas, even though current high prices hinder importing a large amount of gas.

 

China will be able to produce up to 150 bcm of natural gas by 2020, while imports could reach about 90 bcm by then to meet the surging demand, Zhai Guangming, a senior expert with PetroChina, said in March.

 

"The country will need to pump 40-60 bcm of gas from Russia and central Asia through cross-border pipelines by 2020," said Zhai.

 

(China Daily July 14, 2006)