Russia May Delay China Gas Pipeline: lack of demand.
I keep looking for signs that China growth is being inflated for the benefit of speculators. Perhaps China has already hit the head on the ceiling!!
quote.bloomberg.com
Russia May Delay $17 Bln China Gas Pipeline Project (Update1)
March 11 (Bloomberg) -- Russia may delay building a $17 billion natural gas pipeline to China and South Korea from Siberia by four years because of concern that there isn't enough demand for the fuel, a Russian government adviser said.
OAO Gazprom, the monopoly gas pipeline operator in Russia, wants to send the fuel from the Kovykta field, operated by BP Plc, to Western Europe instead and delay delivery to China until 2012, said Andrei Korzhubaev, an economist at the Institute of Petroleum Geology in Siberia.
China is encouraging construction of gas-fired power stations to help cut pollution from coal, reduce the nation's dependence on oil imports and relieve an energy shortage that caused blackouts across two-thirds of the country last year. Gazprom's plan to send the fuel to Europe would require a shorter pipeline to link to a network that already has customers to take the gas.
``Gazprom now holds the official position that it will first set up a pipeline to link Kovykta and the existing network in West Siberia to avoid risks from China,'' Korzhubaev said in an interview at a conference in Shanghai this week. His institute is studying the Kovykta project on behalf of the Russian energy ministry, he said.
Gazprom is in talks with BP affiliate OAO Rusia Petroleum to jointly run the proposed pipelines from Kovykta, which may hold 2 trillion cubic meters of gas, or 10 times Asia's current annual demand.
Neil Beveridge, the Beijing-based commercial manager of gas, power and exploration for BP Exploration Operating Co., BP and Valery Pak, Rusia Petroleum's director general, declined to comment on Gazprom's role in the venture, or possible delays in construction of the line to China.
Gazprom's Chief Executive Officer Alexei Miller met Robert Dudley, the CEO of BP's Russian joint venture, TNK-BP, on Tuesday to discuss Kovykta. The companies declined to comment on the meeting's results.
Gazprom's Stake
Gazprom wants to acquire at least 50 percent of a joint venture to develop Kovykta, which may be set up within a year, Korzhubaev said. BP's Beveridge and Rusia's Pak declined to comment on Gazprom's possible share in the venture.
Korzhubaev's concerns about China's demand are echoed in a speech that was due to be delivered at the conference by Alexey Mastepanov, Gazprom's deputy director of strategic planning, who failed to attend.
Mastepanov planned to say that Northeast China doesn't have a developed gas network, which would take 10 years to establish, according to a copy of his speech distributed by the organizers of the 8th International Conference on Northeast Asian Natural Gas and Pipelines.
A further drawback is that the region is one of China's biggest coal producers, which could limit growth in gas sales, Mastepanov planned to say.
China, Korea
China's largest oil and gas producer, China National Petroleum Corp., would lead construction of the pipeline in China to help the nation ensure continued growth of an economy that expanded 9.1 percent last year. Korea Gas Corp. wants to buy Russian gas to cut costs and reduce its reliance on imported liquefied natural gas.
``I do not think Russia would make a final decision based on the academic institute's suggestion,'' Wu Xingsheng, a senior engineer in the market department of Sino-Russia Oil & Gas Cooperation Committee, which falls under China National Petroleum, said in an interview. ``It's such an enormous project that needs three countries to participate in the discussions.''
The pipeline to China would supply northeastern provinces including Heilongjiang, Jilin and Liaoning and northern provinces such as Inner Mongolia, Beijing and Shandong.
``There is almost no gas market in northeastern China -- there are no big gas-fired power stations or gas networks in the region,'' said Korzhubaev. ``Russia has big concerns about China's ability to absorb the gas, especially after we had a bad experience with Turkey.''
Turkey last year won a reduction in charges for gas from Gazprom after it stopped taking supplies through a new pipeline from Russia for four months.
Northeast China's Demand
Northeast China's gas demand may rise to 3.6 billion cubic meters in 2008 and 12 billion cubic meters in 2012, China National Petroleum, said Liu Hequn, a senior researcher at Sino- Russia Oil & Gas.
``The northeastern market has the potential to grow, but it's necessary to get government support,'' Neil Beveridge, the Beijing-based commercial manager of gas, power and exploration for BP Exploration Operating Co., said in an interview.
The Western route would entail construction of a pipeline from Kovykta to Irkutsk and then to Proskokovo by 2010 to take natural gas from East to West Siberia, which is connected through existing pipelines to the West European market. Two years later, Kovykta may start deliveries to China, provided the partners reach agreements on gas prices and volume on schedule.
``Building an alternative channel first to connect with the Western market will reduce risks for Russia if China says it doesn't have enough appetite to consume the huge amount of gas after the pipeline gets ready,'' Korzhubaev said.
To contact the reporter on this story:
Helen Yuan in Shanghai at hyuan@bloomberg.net.
To contact the editors of this story:
Reinie Booysen at rbooysen@bloomberg.net.
Last Updated: March 10, 2004 21:47 EST |
