Russia is interested in building another pipeline that could carry up to 35 billion cubic meters of natural gas per year to China, this time through Kazakhstan. The initiative, which was announced by Deputy Prime Minister Alexander Novak, comes as Moscow is making a strong shift towards Beijing and has already shipped 40 billion cubic meters of gas to the Asian powerhouse this year. Even though petrol makes up only 2.8% of Beijing’s energy mix, China is the Kremlin’s top energy consumer now that Europe is firmly out of the picture.
The reasoning is straightforward: China has an increasing need for gas. In the first eight months of the year, domestic demand increased 8.8% to 283 bcm, driven by industry, urban heating, and a significant effort to switch from diesel trucks to LNG. China’s demand for natural gas is predicted to increase by more than 50% by 2040. But let’s not forget that gas is a glamorous side dish rather than the main entrée in China, where coal dominates the energy mix with around 60% of the total.
Kazakhstan, meanwhile, is not doing nothing. With gas exports to China at a modest 4 bcm per year, the Caspian state obviously sees space for expansion.
This pipeline would be crucial to Moscow’s efforts to strengthen its relations with Beijing and close the huge revenue gap that Europe has left. Let’s not get ahead of ourselves, though; China is not planning to place all of its energy bets on Russia, and it has no problem leveraging competition to drive down prices.
China is playing the long game, and its thirst for petrol is driving the actions. Russia has to determine if its most recent wager will succeed.
For Oilprice.com, by Julianne Geiger
