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Gazprom moving past Europe, analysts say

Chinese gas growth should outpace Europe's.
By Daniel J. Graeber   |   May 22, 2014 at 6:57 AM   |   Comments

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HOUSTON, May 22 (UPI) -- An energy deal between Russia and China gives Russia's gas company Gazprom a chance to balance its portfolio against European woes, analysis said Thursday.

Gazprom signed a $400 billion deal Wednesday in Beijing in the presence of Russian President Vladimir Putin that calls for as much as 1.3 trillion cubic feet of gas by as early as 2018.

Wood Mackenzie, an energy consultant group, said in a Thursday brief the deal gives Gazprom a chance to shift its focus way from troubles in the European energy market.

"We anticipate overall gas demand from China over the next two decades will grow more rapidly than that witnessed in Europe from the mid-1980s," Gavin Thompson, director of Asia gas research, said in a statement.

Gazprom has tried to add diversity to a portfolio anchored in the European energy sector. Ongoing debt rows between Gazprom and Ukraine, which hosts the Soviet-era transit network delivering much of Russia's gas to Europe, has put that part of Gazprom's business at risk.

The 30-year contract pegs natural gas to the price of oil, and includes a take-or-pay clause that requires China to pay for a set volume of gas regardless of consumption rates.

Gazprom Chief Executive Officer Alexei Miller said the contract is the biggest in its history.

"Russian gas will be sold at a brand new market with a huge potential," he said Wednesday.

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