China signed a landmark deal Wednesday to buy Russian natural gas worth about $400 billion. The deal came one day after Russian President Vladimir Putin said that “significant progress” had been made over the price of the decade-long natural gas supply talks.
The agreement “opened the door for Russia to enter into Asia’s gas market,” said Keun-Wook Paik, senior research fellow at the Oxford Institute for Energy Studies.
The supplies will help to ease gas shortages in China, the world’s second-largest economy, and curb reliance on coal.
The agreement calls for Russian government-controlled Gazprom to supply state-owned China National Petroleum Corp. with 38 billion cubic meters of gas annually, Gazprom spokesman Sergey Kupriyanov told The Associated Press. That would represent about a quarter of China’s current annual gas consumption of nearly 150 billion cubic meters.
According to AP, the contract is worth a total of $400 billion, Gazprom CEO Alexei Miller told Russian news agencies. Gas is due to begin flowing to China as early as 2018.
China and Russia have been negotiating the deal for more than a decade but were hung up over the gas price.
Russia will invest $55 billion in fulfilling the contract while China will invest at least $20 billion, Putin told Russian reporters in Shanghai. He said the gas price would be based on a formula linked to that of oil and oil products.
Plans call for building a pipeline to link China’s northeast to a line that carries gas from western Siberia to the Pacific port of Vladivostok. The development of a gas center on the Pacific will allow Russia to export to prosperous markets in Japan and South Korea.
“Without any overstatement, it will be the world’s biggest construction project for the next four years,” Putin said.
Report compiled with information from Xinhua and The Associated Press.