Troubled Waters Roil Russia's Energy Relationship with China

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Troubled Waters Roil Russia's Energy Relationship with China

Thu, 06/04/2020 - 09:03
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Developing gas resources and shaping gas transmission system in eastern Russia (copyright by Gazprom)
Developing gas resources and shaping gas transmission system in eastern Russia (copyright by Gazprom)

The over 2000-km gas pipeline Power of Siberia, linking Russia's prodigious gas reserves to gigantic energy markets of China, is supposed to be in full swing right now, underscoring the new energy alliance between the Russian bear and the Chinese dragon. At best the flowing gas is so reduced it's barely making a whisper as it moves through the pipeline.

Gazprom is obliged to deliver five billion cubic meters of gas this year.  Since March the newly opened pipeline has been shut down completely for "maintenance," according to Gazprom. Unofficially the Covid19 pandemic has so undercut Chinese demand for natural gas that the need for the product has significantly slackened.

The consequences of the Covid 19 illness were not limited to the Chinese side of the border. In Tschajanda, Northeast Siberia, Gazprom had to quickly build a mobile hospital to deal with a ferocious outbreak of the virus among its personnel. 3500 of the 10,000 man workforce was infected with Covid 19.  Gazprom says the problem is now under control. 

Yet there are still other, even more menacing issues for Gazprom and the future success of Power of Siberia:  according to the Russian Internet newspaper Lenta there have been serious problems with the drilling and development of gas wells in the region. 20 of the wells drilled turned up dry with a loss of 4.3 billion euros.  41 of the 148 producing wells are producing nowhere near what was anticipated.

Given the geographical position of the Tschajandas region it may be difficult for Gazprom to fulfill its gas supply obligations. One possible way, assuming continued difficulty with gas production it may behoove Gazprom to consort with independent producers, like Rosneft, whose gas productions could help Gazprom over the current hump.

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