The startup of the Power of Siberia Russia-China natural gas pipeline in December is expected to weigh on the mid-term LNG demand growth potential of China, the world’s second largest importer of the fuel, adding another bearish factor to an already oversupplied Asian market. The immediate impact on the region’s spot fundamentals and prices for this coming winter will likely be limited, however, given the relatively small volume that will be injected into the pipeline network over the first year.
The construction of the northern section of the China-Russia gas pipeline eastern route was completed Wednesday, and PetroChina is expecting supplies into northern China to commence December 1, the state-owned major said Thursday. “The growth of China’s LNG imports is expected to be affected,” said a source with one of China’s major city gas suppliers, adding that they would consider lowering LNG imports into northern China once Russian pipeline gas is made available.
Two Chinese end-users said they were contemplating reselling some of their winter LNG cargoes into the spot market if the pipeline starts up as planned. “You might see us in the market this winter, perhaps not to buy, but to sell,” said a Chinese LNG importer. The Power of Siberia is one of the most anticipated energy projects in Asia, with significant implications for China’s natural gas supply, LNG import demand in the region and Moscow’s energy strategy in Asia. The project will further enhance China’s supply security, and follows Beijing’s decision to merge gas pipelines of the three national oil companies to boost connectivity and ease infrastructure constraints.