China-Russia optimistic about gas deal

June 21, 2011 at 8:04 AM
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BEIJING, June 21 (UPI) -- Beijing and Moscow have been unable to settle on a price for China to buy Russian gas, but a Russian official expressed optimism about the deal.

Speaking to reporters in Beijing, Valery Yazev, president of the Russian Gas Association and deputy chairman of the State Duma of Russia, said it was natural for more time to be spent on such a massive deal.

If finalized, Russia would provide natural gas from its Siberian reserves to China's energy-hungry markets. The deal, according to some Russian estimates, would be worth about $700 billion over 30 years.

A deal could not be reached even last week when Chinese President Hu Jintao visited Moscow to meet with Russian leaders.

"If the price can be settled in 2011, Russia is likely to start supplying China with gas by pipeline from 2015," Yazev was quoted as saying by the state-run Xinhua Chinese news agency.

The China National Petroleum Corp. has offered to pay $235 for each thousand cubic meters of the Russian gas, but Russia's OAO Gazprom wants $350.

One analyst told China Daily Gazprom is focused on achieving a price agreement in line with that of its long-term, oil-indexed contracts for pipeline supplies to its European customers.

However, Pang Changwei, director of the institute for international oil politics at China University of Petroleum in Beijing, said that equation was unrealistic as European markets are much farther than China, thereby making a difference in transportation costs.

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