May 23, 2014 / 11:49 AM / 3 years ago

Factbox: Details of Russia-China gas deal

3 Min Read

(Reuters) - China and Russia signed a $400 billion gas supply deal on Wednesday, securing the world's top energy user a major source of fuel and opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.

Below is a summary of development and its costs:

ROUTE - The 4,000 kilometer "Power of Siberia" pipeline, spanning marshlands, mountains and seismic zones, will mainly take gas from the 1.2 trillion cubic meter East Siberian Chayanda gas field and pump it to China's main consumption centers near its eastern coast.

Russia will begin delivering from 2018, building up gradually to 38 billion cubic meters (bcm) a year.

It is also planned to have an offshoot to supply Gazprom's liquefied natural gas (LNG) export projects at Sakhalin and Vladivostok to serve major buyers such as Japan and South Korea.

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GAS PRICE: No price has been officially announced, but sources say it is around $350-380 per thousand cubic meters.

This would benefit China as it is cheaper than Asian spot LNG prices. Russia also benefits as industry sources say it is in line with recent European discounts and still slightly above its break even costs.

CHART-Global gas prices: link.reuters.com/jyf59v

PRICING FORMULA: The pricing formula is based on a basket of crude oil products, including a take-or-pay contractual obligation for China to take the gas even when it does not need it or it must pay a fine.

China's National Development and Reform Commission is raising domestic gas prices in key consumption centers to reflect growing gas import costs, paving the way for Russian imports, which are more expensive than Turkmen supplies it already imports.

PRE-PAYMENTS: Russia and China have agreed in principle on a $25 billion prepayment under the deal, according to Alexander Medvedev, chief executive of Gazprom Export, although he added that "details are being discussed."

DEVELOPMENT COSTS: The overall cost for the Chayanda and Kovykta upstream development, which geologists say is more complex than Russian west Siberian gas fields, and the pipeline and processing costs will likely exceed $50 billion, and Wood Mackenzie says it will be "one of the largest oil and gas investment decisions of the year."

Russia plans to invest $55 billion in exploration and pipeline construction to China's border, and China's CNPC said it would build the Chinese section of the pipeline.

Compiled by Henning Gloystein, Oleg Vukmanovic, Vladimir Soldatkin, and Amran Abocar; editing by Anna Willard and Giles Elgood

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