The Gazprom projects fail: the Chinese reject Russian gas

The Gazprom company hopes for expansion of Chinese market seem to be under question. Yesterday, vice president of PetroChina company Shi Singkuan said in his interview to China Daily newspaper that China does not intend to buy Russian gas.

It should be reminded that once, East-West gas pipe line seemed to be very prospective. It was supposed that after the pipe line is ready, China will buy Russian gas. This project would be very profitable for China: by the year 2005, the Chinese intend to increase consuming gas twice, up to 80 billion cubic metres a year. While negotiating with Jiang Ze Min, Vladimir Putin insisted on the Gasprom participation in the consortium which will build the pipe line.

According to Kommersant newspaper, the agreement about building the pipe line was signed July 4. In the project participate: PetroChina company (50 percent), Sinopec (5 percent), RoyalDutch/Shell, ExxonMobil, and Gazprom (15 percent each). The project foresees building 4,100-km pipe line, which since 2005 should transport gas from the Tarima zone deposits (the city of Lyannan) to Pacific provinces of China, first of all to Shanghei.

Now, the Chinese say that Tarima deposit will satisfy all their needs. This is why, there is not necessity of supplying gas from Russia. Taking into account that the project is very expensive (while, according to the experts, it will be recompensed only by 2013-2014), gas supplies to China would seriously increase its attraction for Gazprom. For the time being, it looks like the company only invests money into economy of another country. This is, probably, not so bad, if Gazprom did not had so big debts. According to some information, they make at least 11 billion dollars, about a third of the budget of the company. Therefore, it is clear that the company has some hopes connected with the project.

It is hard to say whether some staff changes in the company influenced the Chinese decision. Anyway, now the Gasexport company director is Yury Komarov, deputy chairman of the Gazprom administration. Former leader of Gazexport, Oleg Sienko is said to have made some serious mistakes in foreign policy. What the mistakes that are is not known, though, probably, this was the reason why the Chinese rejected Russian gas. One more circumstance should be remembered. As well known, the Gazprom leadership many times declared its intention to get rid of nonspecialized assets, meaning NTV company. Though, it still has not done this. Now the Gazprom position may be changed, though it is almost impossible: the election is coming.

Certainly, there will be some rumours about staff changes in Gazprom. Chairman Alexei Miller will then explain for the President why such a prospective project is being spoiled. Moreover, the idea to create gas OPEC with Russian participation could be put into question in Middle-Asian republics of the former USSR. Not long ago, Turkmenistan signed an agreement with Pakistan and Afghanistan about building gas pipe line linking Turkmen deposits with the Pakistani harbour Karachi. Gazprom was invited for participation in this project, though not for gas export.

However, the PetroChina vice president’s statement could only reflect some internal problems of Chinese fuel and energy complex. This statement could be an answer of PetroChina to unnatural activity of one more Chinese gas company – CNOOC: Mr Shi seems to protect his native gas producer. Though, if even the question is about only Chinese internal issues, this cannot simplify the situation of Gazprom.

Vasily Bubnov PRAVDA.Ru

Translated by Vera Solovieva

Read the original in Russian: http://www.pravda.ru/main/2002/07/19/44423.html