The conflict between Iran and Israel has increased China’s interest in the Russian Power of Siberia-2 gas pipeline, The Wall Street Journal reports, citing its sources.
Facing the ongoing reorientation of the Russian energy sector to the eastern markets, the Power of Siberia-2 project was again in the spotlight. The pipeline, which is supposed to connect the gas fields of Western Siberia with China through the territory of Mongolia, remains one of the most ambitious areas of Russian-Chinese energy cooperation. But, despite its potential scale, the project is still awaiting key agreements, AMarkets lead analyst Igor Rastorguev explains.
From an economic point of view, the pipeline with a conditional price of $250 per thousand cubic meters of gas can bring Russia up to $12.5 billion in export revenue per year. This means that even with a conservative scenario, revenues to the federal budget can range from $4 billion to $7 billion annually, and total tax revenues may amount to about 400 billion rubles. This level of fiscal effect makes the project attractive not only for Gazprom, but also for the entire budget system, especially in the face of reduced supplies to Europe.
However, the main intrigue of the project lies in the terms of the future contract, the expert emphasizes. China insists on prices close to domestic Russian ones, which significantly reduces margins. But there is reason to believe that with the energy deficit growing and increased competition with suppliers of liquefied natural gas from the United States and Qatar, Beijing may reconsider its position. Especially if the pipeline is among the few routes that can guarantee long-term and stable supplies.
“For Russia,” Power of Siberia – 2 “is not just an export project, but part of the systematic adaptation of the raw materials sector to new realities. It supports production in traditional regions, creates a stable channel for the inflow of foreign currency earnings and reduces dependence on volatile European markets. However, while the contractual parameters remain uncertain, it is premature to talk about accurate financial results. The final efficiency will depend on the price of gas, the scale of supplies, the volume of investments and the timing of the implementation of the infrastructure, – Igor Rastorguev says. “Thus, the project can play a key role in Russia’s long-term energy strategy, but its final fate still depends on the negotiation process and geopolitical factors.”