Russia wants to supply all of China's gas needs

[September 27, 2010]  BEIJING (AP) -- China and Russia signed agreements Monday to boost energy cooperation, while Moscow said it wants to supply its energy hungry neighbor with all its natural gas needs.

No dollar value was given to the agreements signed during a state visit by Russian President Dmitry Medvedev, but they included documents on cooperation in coal, natural gas, nuclear energy and renewable energy.

Russian Deputy Prime Minister Igor Sechin told reporters in Beijing that Russia is in talks with Chinese partners on plans to launch natural gas supplies to China starting in 2015, according to the state ITAR-Tass news agency.

"Russia is ready to meet China's full demand in gas," Sechin was quoted as saying in the report.

Russian state-controlled gas monopoly Gazprom said that under that agreement it will supply China with 30 billion cubic meters of gas annually for 30 years starting in late 2015. The final deal is expected to be signed next summer, Gazprom said.

Sechin said that if talks with China on gas supplies went well, Russia could sign commercial contracts by the middle of next year, ITAR-Tass said.

Russian news agency Interfax cited Russian Energy Minister Sergei Shmatko as saying that "in my opinion, the main terms of (gas) supplies, apart from the price, have been agreed upon."

Russia is the world's biggest energy producer and China is the world's largest energy consumer, overtaking the United States last year.

Although Europe remains Russia's largest export market for gas and oil, both Beijing and Moscow have been seeking to diversify their energy sources and markets, despite a long history of mutual suspicion and tensions.

Efforts by China and Russia to establish gas ties have been stalled for years, mainly because of disagreement over pricing. While Russia is eager to link gas prices for China to oil prices in the way it does in Europe, China views any European-level prices as too high.

Gazprom's statement made no mention of possible routes for the supply, but the company has been long working on the Altai pipeline project, which would link energy-rich Western Siberia with Shanghai.

Gazprom announced in 2006 that it would build two gas pipelines to China, but these plans have been upset by disagreement over future gas prices.

Turkmenistan, however, is enjoying a head start, with China set to become the largest buyer of gas from the central Asian country over the coming years as a pipeline linking the two countries reaches full capacity. Deliveries began earlier this year and are expected to hit 40 billion cubic meters in 2015.

Medvedev is on a three-day visit that started Sunday. He met Chinese President Hu Jintao for talks Monday and praised closer ties with China.

"I believe that the contact between the two countries is completely in the interest of the Russian and Chinese peoples," Medvedev said in opening remarks.

Hu hailed a "new era" in partnership. "Both sides believe that the current strategic partnership between China and Russia stands at a new starting point," the Chinese leader said at the end of talks.

Hu and Medvedev also attended a ceremony in Beijing to mark the completion of a 625-mile (1,000-kilometer) crude oil pipeline from eastern Siberia to China, which connects Russian oil fields with Daqing, a major oil production base in northeastern China. In late August, Russia opened its section of the pipeline.

The pipeline is part of a deal signed last year in which China will provide a $25 billion loan to Russia in exchange for 15 million tons of oil annually (300,000 barrels per day) for 20 years.

Russia and China fell out bitterly 50 years ago over interpretations of communist ideology. In recent years, their relationship has warmed but they remain divided by culture and a preference in both capitals for acting independently.

Both see themselves as rivals to Washington and all three are permanent members of the U.N. Security Council. China and Russia have close ties to Iran and though they supported U.N. sanctions adopted last month against Tehran over its suspected nuclear program, they have objected to stronger measures.

China and Russia also signed an agreement on fighting terrorism and separatism.

[Associated Press; By GILLIAN WONG]

AP Business Writer Nataliya Vasilyeva in Moscow contributed to this report.

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