http://www.reuters.com/article/2013/03/22/us-russia-china-gas-idUSBRE92L10P20130322
In the article, the author talks about a deal between China and Russia for conventional gas, has been stuck at the talks level. The deal would possibly involve Russia selling gas from its new Eastern Siberian gas fields to China. The problem is that both sides are not agreeing on the price of the gas. Russia wants to get the same price that it does from its European buyers ($300 per 1000 cu. m.) but China is only willing to pay $250. China argues that $250 is the maximum price that it can offer without forcing its petroleum companies into losses. Also, above this price, China maintains, that its producers would lose their competitive advantage in the global markets.
The deal is important for Russia as it is looking for ways to finance more oil and gas projects, construct pipelines, etc. China, on the other hand, is expecting a shortfall in meeting its energy needs. China is the fastest growing energy consumer and therefore needs the deal to meet the demand for gas.
The deal needs to be finalized fast if Russia wants to enter the Asian markets. This is because there are many other suppliers such as Myanmar that are also willing to supply gas to China.
In the article, the author talks about a deal between China and Russia for conventional gas, has been stuck at the talks level. The deal would possibly involve Russia selling gas from its new Eastern Siberian gas fields to China. The problem is that both sides are not agreeing on the price of the gas. Russia wants to get the same price that it does from its European buyers ($300 per 1000 cu. m.) but China is only willing to pay $250. China argues that $250 is the maximum price that it can offer without forcing its petroleum companies into losses. Also, above this price, China maintains, that its producers would lose their competitive advantage in the global markets.
The deal is important for Russia as it is looking for ways to finance more oil and gas projects, construct pipelines, etc. China, on the other hand, is expecting a shortfall in meeting its energy needs. China is the fastest growing energy consumer and therefore needs the deal to meet the demand for gas.
The deal needs to be finalized fast if Russia wants to enter the Asian markets. This is because there are many other suppliers such as Myanmar that are also willing to supply gas to China.
2 comments:
There are several clear benefits that both Russia and China can get from the deal. Not only does Russia can finance its field development, pipeline construction, and an liquefied natural gas plant, but also it can expand their market to compete with African and Australian competitors. China can have the fuel supply they need to satisfy its fastest growing energy consumer and at the same time, reduce risks delivered by tanker from as far away as Australia and Africa. Therefore, it is very necessary for the two countries to come to an agreement as soon as possible.
Interesting article about international politics and economics. I would guess whichever side needs the deal to happen more will give-in. I do not understand how China can demand a cheaper price than the rest of Russia's customers. It is not Russia's fault China's firms are not efficient enough to profit from those prices. If the deal doesn't happen it will be interesting to see the effect it has on China's growth as they struggle to find sufficient sources of energy.
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