Exclusive: Gazprom may use third party gas to fill China pipeline

MOSCOW (Reuters) - Russia’s Gazprom has held talks with a small Siberian energy firm on using its gas to fill a pipeline to China if the state-controlled giant’s own projects to produce and transport the gas are not ready in time, industry sources said.

The logo of Gazprom is pictured at the 26th World Gas Conference in Paris, France, June 2, 2015. REUTERS/Benoit Tessier

As part of Russia’s strategic shift eastwards prompted by rows with the West, Gazprom agreed last year to start pipeline gas supplies to China in 2018-2019, raising them gradually after that to make China one of the biggest customers for Russian gas.

However, Gazprom has less money available to finance the scheme than it had expected because low world gas prices have hit its revenues, while sanctions imposed on Russia over Ukraine are making it hard to secure loans from the West.

One industry source told Reuters that Gazprom had asked the privately-owned Irkutsk Oil Company, which holds large gas reserves in the region and some infrastructure, to pledge up to 7 billion cubic meters of gas per year for Gazprom’s future supplies to China.

“There is an agreement in principle, but we don’t know the prices yet,” the source said.

A second source, close to Gazprom, said the firm had started talks with third party suppliers due to financial constraints. “Massive investments are needed there, and it is a huge problem in the current situation.” the source said, confirming that Irkutsk was one of the companies approached by Gazprom.

Gazprom spokesman Sergei Kupriyanov said his firm had had contacts with Irkutsk Oil Company. But asked if the talks were about the Siberian firm supplying gas for pumping to China, he told Reuters: “That’s not confirmed.”

“The contacts were for information only on the creation of a gas balance in the east.”

Gazprom, which has a monopoly on Russian gas exports, is treated by the Kremlin as a national champion. Therefore, for the world’s biggest gas company to seek help from a small independent to complete such a high-profile project would raise eyebrows in the industry.


Under the Gazprom project, two large gas fields in the far-flung regions of East Siberia, Chayanda and Kovykta, are designated as the principal source for the supplies to China.

Gazprom had valued total investments for the project at $55 billion, which includes the development of the fields and construction of a pipeline called The Power of Siberia which will take the gas to China.

Apart from costly investments, Gazprom has faced a problem with high helium content at Chayanda. The company will have to separate the helium from methane, the prime type of gas destined for further sales to China.

Potentially, there could be other companies able to feed their gas into Gazprom’s pipeline.

Another Russian energy champion, Rosneft, currently produces more than 7 billion cubic meters of gas in eastern Siberia with a view to increase it to 16 bcm by 2022. It has reserves in the region estimated at 1 trillion cubic meters.

It has said in the past that it wants to sell gas to China, but is legally barred from doing so directly due to the Gazprom export monopoly. Rosneft declined comments.

To view Gazprom's Eastern Programme please click at

Additional reporting by Denis Pinchuk; writing by Vladimir Soldatkin; editing by David Stamp