A new deal is in the works between China and Russia. China plans to offer Russia a large loan to the natural gas giant in Russia as part of a 30 year long gas contract. In this deal Russia seeks to build international competition and China seeks to buy gas more cheaply. The loan would allow the monopoly to apply the credit line toward the construction of gas pipelines therefore lowering the cost of delivering Russian gas to China. The logistics of the deal state that China is to buy 30 billion cubic meters of Russian gas a year over the next 30 years. Exports of gas are expected to begin at the end of 2015 through a pipeline in the Altai Mountains.
Although China is not in a rush to finalize the deal, Russia would like to seeing as they feel they can bring diversity to the gas supply in Asia, while Europe’s demand for Russia’s oil is beginning to lessen. Experts are expecting the pipeline into China to be at first a little more expensive than if they were still able to have Europe as their largest export for gas, but the marginal profit gain to be well worth the extra expense. While China has already has deals for gas with the well off Turkish-men, Russia is really leaning on this new deal to bring in profit for them and boost their gas economy.
-Nicole Lombardo
(Wall Street Journal)
http://online.wsj.com/article/SB10001424052748704116004575521433569135028.html?mod=WSJ_Energy_leftHeadlines
deal between China and Russia seems to be a very effective way to benefit all parties involved. Russia has the opportunity to expand their gas empire while China can recieve their supply of gas cheaper. I am curious about why China is holding off on signing the deal. Are there any possible negative side effects of China choosing to officially sign the contract. Even though China has done well while doing business with Turkey for oil, I feel the idea of this contract would be to provide even cheaper oil for China. The advantage for Russia is clear since the need for gas in Europe has been declining and Russia needs another way to export their gas. I feel that overall, this would be a beneficial contract to sign.
ReplyDelete-Ashley Luddy
I agree with Ashley that this deal between China and Russia is very effective. China must really think about this deal, because even though it has not been finalized it will really be a big purchase for China to offer Russia a big loan for their large natural gas company. The one thing that is a little concerning but not surprising is how expensive this deal would be for China. It's a very interesting article and should be interesting to see when China decides to agree with this deal.
ReplyDelete-Michael Sheinfeld