BG Group & Gazprom’s views on the Chinese gas market

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BG CEO Helge Lund and Alexander MedvedevDeputy Chairman of the Management Committee of Gazprom discussed the importance of China’s gas market at the Gastech conference in Singapore last month.

According to Gas Processing, Lund noted that gas accounts for only about 5% of the energy fuel mix in China today. “We know that this will grow,” he opined. “China has committed itself to improving its air quality. The government has announced plans to cap carbon emissions by 2030, and expand its carbon trading mechanism across the whole country by 2017," Lund explained.

"That latter item—air quality—will require a change to the fuel mix,” he continued. “The share of gas has to increase by replacing coal in homes, factories and in the power sector. LNG will be a key source of supply of this gas to China, as well as to many other markets globally.”

Gas Processing also reports that Medvedev said Gazprom is making China a key strategic market for the expansion and diversification of its LNG export business. Gazprom has a standing contract with China to supply 38 Bcmy of gas via an Eastern route, and some progress has been made on the construction of production, transportation and processing infrastructure. The 30-year agreement would include the construction of a conduit—the Power of Siberia pipeline—between Russia and China.

Meanwhile, negotiations on commercial terms are ongoing for 30 Bcmy of gas exports to China via a western route along another new pipeline, Power of Siberia 2. This agreement would also span 30 years. Additionally, the economic feasibility of sending gas supplies from the Russian Far East is being examined.

However, the stabilization of China's economic growth from its previously rapid pace is forcing the revision of industry development plans. For this reason, time is needed to reassess and reevaluate China's future energy demand growth.

However, Medvedev asserted that Gazprom remains confident in the significant growth potential of China's gas demand. As a result, Gazprom continues to extend its business ties with Chinese partners for gas supply agreements as well as for gas storage, electricity generation and gas processing projects.

For more articles by Gas Processing, click here.

What is your view on China gas & LNG demand growth in the mid to long term? Leave your comments below.

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