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27 Oct, 2008 02:55

China firms up on Russian energy option

Beijing's set to move for a bigger share of Moscow's oil and gas by agreeing to extend Russia's largest pipeline project to China this week. But ahead of Premier Wen Jiabao's meeting with Vladimir Putin this week, experts warn China faces tough competitio

Whereas Western Europe gets a third of its oil and gas from Russia, China buys less than 5 per cent of its needs from its northern neighbour. But over the weekend Moscow moved to change that.

Gazprom called to speed up talks to pump China 40 billion cubic metres of gas via the new Altai pipeline. The two nations' Deputy Premiers also met to tie up a Chinese extension to the 4,700 km ESPO East Siberian oil pipeline, with Russia’s Igor Sechin hailing the outcomes.

“We're negotiating new deals to supply gas, oil and electricity. Our meetings this week put the bilateral partnership on a new level.”

With GDP growth in both countries hit by the financial crisis, Chinese Deputy Prime Minister Wan Qishan, says its time to focus on practicalities.

“In this grim time we pay particular attention to practical cooperation between China and Russia.”

Pavel Sorokin, Oil and Gas analyst at Unicredit Aton, says Russia can't meet Europe and China's oil needs, so Moscow's hustling for the highest bid.
“I actually doubt that they'll be able to supply both in the volumes that they're used to requiring, so I think they'll have to make some choice between the two. But China is the one with a deficit in oil, basically, and with demand growing Russia is trying to get the best price.”

Russia has a luxury of choice. If China falls through, Tokyo wants to build an ESPO extension to Japan.