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Price formula of russian gas to China

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From Kommersant 17.06.2021

https://www.kommersant.ru/doc/4858093

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"Power of Siberia" in money

Gazprom disclosed the price of supplies to China

For the first time, Gazprom has officially disclosed data that allow estimating the price of gas supplies via the Power of Siberia gas pipeline to China. According to the deputy chairman of the board of the company, Famil Sadigov, in 2020 Gazprom's revenue from the sale of gas to the PRC amounted to 44.3 billion rubles, which, with a volume of 4.1 billion cubic meters of gas, gives an average price of about $ 150.2 per 1,000 cubic meters. ... Thus, gas from Russia in 2020 was cheaper for China than from other major suppliers. At the same time, the price of supplies to the country turned out to be slightly higher than the average for Gazprom's European contracts.

Gazprom's revenue from gas supplies to China in 2020 amounted to RUB 44.3 billion. with a volume of supplies of 4.1 billion cubic meters, said Deputy Chairman of the Board of the company Famil Sadigov at a press conference on June 16. Based on this, the average price of gas supplies to China in 2020 was $ 150.2 per 1,000 cubic meters. For comparison, the average export price of Gazprom to non-CIS countries in 2020 was $ 143 per 1,000 cubic meters.

The agreement on the supply of Russian gas to China via the Power of Siberia gas pipeline was concluded for 30 years and envisages an annual supply of 38 billion cubic meters, but Gazprom will reach these volumes only by 2024.

In 2021, Gazprom must supply 10 billion cubic meters of gas, and the Chinese CNPC, according to the contract, must pay at least 85% of these volumes. The gas price under the contract is tied to the price of oil products with a nine-month lag.

The parties never disclosed the contract price formula and did not even give an approximate numerical guideline. Former deputy chairman of Gazprom, Alexander Medvedev, after signing a contract with China, advised not to be interested in the price of supplies, noting that "now every housewife wants to know the price of gas, but this is inappropriate." The only hint was given by the head of Gazprom, Alexei Miller, who estimated the total volume of the contract for the entire period of its operation at $ 400 billion. At the same time, the monopoly assured that the price for China is comparable to the level for European far abroad countries.

The cost of Russian gas supplies was disclosed by the PRC customs:

  • in the first quarter of 2020, it was $ 202 per 1,000 cubic meters,
  • in the second - $ 182 per 1,000 cubic meters,
  • in the third - $ 144 per 1,000 cubic meters,
  • in the fourth it was at the lowest level of $ 126 per 1,000 cubic meters.

But the data of the Chinese customs, according to the estimates of Kommersant's sources in the industry, do not always accurately reflect the contract prices.

Famil Sadigov said on June 16 that the company plans to supply 8.5 billion cubic meters of gas to China in 2021, doubling its revenue in relation to 2020. However, these figures cannot be regarded as an accurate forecast: the volumes are estimated at the take-or-pay level (85% of the contractual 10 billion cubic meters), and the price, apparently, is based on the forecasted oil price included in Gazprom's budget for this year - $ 50 per barrel. Based on the data for 2020, the level of the curve in the contract between Gazprom and CNPC may be 10% of the Brent price. Thus, at the current oil price of $ 74 per barrel, gas for China may cost $ 265 per 1,000 cubic meters.

Russian pipeline gas is the cheapest for the Chinese market, said Maria Belova, research director at Vygon Consulting.

So:

  • Uzbek gas in 2020 cost China $ 180 per 1,000 cubic meters,
  • Turkmen - at $ 210 per 1,000 cubic meters,
  • pipeline gas from Myanmar - $ 340 per 1,000 cubic meters.

As for LNG, the average price of its imports in 2020 was about $ 230 per 1,000 cubic meters, said Sergey Kapitonov, gas analyst at the Skolkovo Energy Center of the Moscow School of Management. The most accessible sources of LNG, Maria Belova reminds, were Nigeria and Malaysia ($ 200 per 1,000 cubic meters), the most expensive is Qatar ($ 275 per 1,000 cubic meters).

 

 

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