Major Russian natural gas producer set to expand business in China
Published: Feb 07, 2024 08:50 PM
Staff members from PipeChina conduct a daily inspection of the China-Russia east-route natural gas pipeline in Qinhuangdao, North China's Hebei Province on November 1, 2022. Photo: VCG

Staff members from PipeChina conduct a daily inspection of the China-Russia east-route natural gas pipeline in Qinhuangdao, North China's Hebei Province on November 1, 2022. Photo: VCG

Major Russian natural gas producer Novatek is reportedly building a new China-based team to explore marketing the fuel, according to media reports on Tuesday, a move that experts said signals stronger bilateral energy trade ties on the basis of mutual respect and benefits.

Closer energy cooperation will help secure energy supplies and stabilize prices for China, and also expand markets for Russia, industry insiders said.

A trade expansion will also help to reduce the risks of relying too much on any single market, particularly the US, the world's biggest liquefied natural gas (LNG) exporter, experts said.

Novatek, Russia's largest LNG producer, has been building a Beijing-based business development and marketing team in recent months, Reuters reported, citing unidentified sources familiar with the matter.

The Arctic LNG 2 project, a landmark case of China-Russia energy cooperation, was hit with US sanctions in November ahead of its planned start this year, the report said.

Novatek could not be reached for comment as of press time on Wednesday.

The reported move by the Russian energy conglomerate caught the attention of Chinese industry insiders and experts, who described it as another development in mutually beneficial cooperation in energy trade.

"The Russian company's reported move is within expectations, as normal energy trade between China and Russia is expanding despite Western sanctions," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Wednesday.

China has always been an important market for Russian natural gas suppliers. Russian exports of natural gas to China in 2023 increased by 61.7 percent year-on-year, reaching $6.4 billion, making China the second-largest importer after Turkmenistan, Russian news agency TASS reported, citing official data.

Moreover, the natural gas supplied to China via the pipelines of Power of Siberia - a Gazprom-operated pipeline in Eastern Siberia - in 2023 amounted to 22.7 billion cubic meters, about 1.5 times that of 2022, according to Russia's state-owned energy giant Gazprom.

Experts predicted that China's natural gas trade with Russia will expand in 2024, driven by anticipated demand for stable energy supplies and prices.

The International Energy Agency (IEA) predicted in its latest Gas Market Report in January that global demand for gas is set to pick up in 2024 due to colder winter temperatures and easing prices.

"But geopolitical risks and supply-side concerns could trigger renewed price volatility," the IEA said.

The need to balance the risks of heavy reliance on countries such as the US is another reason for China-Russia trade expansion, experts said.

"China-Russia energy trade has shown a positive trend and cooperation in the sector will only get stronger for energy security reasons," Ma Yinchuan, head of the China Industrial Gases Industry Association, told the Global Times on Wednesday.

Ma gave the example of how China has been reducing imports of helium, a non-renewable natural resource that is most commonly recovered from natural gas deposits, from the US in the past two years while using Russian imports as a replacement.

China-Russia energy cooperation has been the centerpiece of bilateral economic and trade ties in recent years.

On December 15, 2023, Chinese Vice Premier Ding Xuexiang called for enhanced high-quality energy cooperation with Russia at the 20th meeting of the China-Russia Energy Cooperation Committee, the Xinhua News Agency reported.

Ding called on the two sides to consolidate energy trade and mutually beneficial cooperation, promote the construction and stable operation of oil and gas projects, and build nuclear energy projects with high standards and high quality.