“Rosneft” will attempt to break the monopoly of “Gazprom” with China

As it became known to RBC, Rosneft is making another attempt to break the monopoly of Gazprom on export of pipeline gas, this time in the Eastern direction. About negotiations “Rosneft” with Beijing Gas Group told the source in an oil company.

RBC sources say that it took several rounds of talks with the Chinese side, the last during the visit of the President of “Rosneft” Igor Sechin in Beijing in mid-March. The gas can be supplied from srednebotuobinskoye, or Verkhnechonskoye, Yurubcheno-tokhomskoe fields of Rosneft in Eastern Siberia, said one of the interlocutors. And the price will not be lower than those of Gazprom (in may 2014 signed a 30-year contract to supply CNPC with 38 billion cubic meters of gas annually, totaling about $400 billion), but it will still be cheaper than liquefied natural gas (LNG), he adds.

However, the volumes and terms of deliveries are pending, another source warns: this will depend on whether Rosneft win the right to export pipeline gas or associated petroleum gas only on “Force of Siberia” from fields located along the pipe.

The representative of “Rosneft” Mikhail Leontyev refused to comment on the negotiations with Beijing Gas Group, but the fact is not denied. “We are negotiating with various gas buyers, we have buyers of gas in Europe and Asia, but, unfortunately, don’t have the rights to export”, he said RBC. The representative of the Beijing Gas Group did not respond to a request RBC.

Beijing supplier

Beijing Gas Group is a subsidiary of a public-private Beijing Enterprises Holdings Limited, a major gas supplier in Beijing (in 2014 the amount of consumption reached 11.3 billion cubic meters). In addition, according to Platts, the company provides 9% of gas supplies to end consumers in China.
In 2014, according to its own data, the company sold to 9.96 billion cubic meters of gas.

Beijing Gas Group buys gas from “Gazprom”, told RBC two sources in “Gazprom export”. Managers of Gazprom met with its representatives, but contract negotiations failed, said one of the interlocutors. According to him, Beijing Gas Group procures natural gas from CNPC, with which Gazprom has signed a major contract. In construction of the pipe “Power of Siberia” monopoly is not going to let competitors have said repeatedly its representatives. On Wednesday, Gazprom spokesman did not respond to a request RBC.

“Rosneft” has long sought the right to export pipeline gas independently or through “Gazprom export”. Last year, Sechin wrote a letter to President Vladimir Putin with a request to facilitate the conclusion of a contract with a monopoly to supply gas to Europe. But “Gazprom” has acted sharply against, citing the fact that the emergence of alternative suppliers will bring down prices in the competitive market. And Putin has not taken any decision on this request.

To supply gas to China oil company is also eyeing for several years. Earlier, Sechin said that “Rosneft” is ready to put on the “Power of Siberia” from 2 billion to 30 billion cubic meters of gas. By 2030 the company plans to produce 45 billion cubic meters of gas annually in fields in Eastern Siberia.

The Russian government until mid-may 2016 must consider the question of the admission of independent gas producers to the gas pipeline “Power of Siberia”, but with the preservation of the “single export channel” (i.e. Gazprom), according to the Protocol of the presidential Commission on fuel and Energy complex (RBC has a copy), which took place in October of 2015. We are talking about selling natural and associated gas produced at new fields in Eastern Siberia and the Far East. Earlier they were talking about the possibility of “Gazprom” to buy from competitors and sell on export netback (export price minus transport costs) is only associated petroleum gas at the “Power of Siberia”.

Chinese consumers are obviously interested in addressing a single channel of export of gas from Russia and increase the number of gas suppliers to buy it cheaper, says Deputy Director of the national energy security Fund Alexei Grivach. But in negotiations with Rosneft, he was probably talking about supplies in the long term after 2020, he suggests.