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13 Oct, 2009 09:03

China gas agreement to turn on the taps

Gazprom CEO, Alexei Miller, has announced that China and Russia have agreed on ramping up gas supplies to the booming Asian economic powerhouse.

Speaking with journalists in Beijing, Miller said that an agreement had been initialed between Gazprom and the China National petroleum Corporation, with a signing by the Russian Prime Minister, Vladimir Putin, and his chinese counterpart, Wen Jiabao, to take place later on Tuesday.

"The frame agreement on the main terms for gas supply to China has been initialed and it will be signed on Tuesday in the presence of the Russian and Chinese prime ministers,"

The agreement will see an estimated 70 billion cubic metres (bcm) delivered to china via two routes, with 30 bcm coming via a western route sourced in Western Siberia, and a further 30 bcm coming via an eastern route, sourced in East Siberia, the Russian Far East and Sakhalin.

Miller said final pricing details would be  outlined in the final contract, with pricing to be linked to gas prices for Europe. The Gazprom CEO did not state when the first deliveries would be made, but indicated that the western route would be operational first with existing infrastructure used.

Speaking with Business RT, Mikhail Krutikhin, partner and analyst with independent consultants RusEnergy, said the key issues of pricing and contract volumes remain ahead, and that the announcement, although potentially positive, follows in the wake of a range of similar agreements which have faltered.