Home World Market China-Russia natural gas pipeline carries significance

China-Russia natural gas pipeline carries significance

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Completion of the China-Russia natural gas pipeline is a necessary push for China’s energy consumption pattern. Despite the setbacks the project has encountered during its construction and uncertainties it may face in the future, the completion of the east route of the pipeline is a meaningful step for China as it inches the whole project closer to delivery.

Construction of the northern section of the pipeline’s east route was completed last week and will start providing natural gas on December 1. The pipeline is expected to pump 5 billion cubic meters of natural gas to China in its first year.

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The east route of the pipeline will soon begin transporting gas, and this carries strategic significance for China. The natural gas from Russia will arrive just in time to support heat generation this coming winter. After China made its commitment to tackle pollution by moving away from coal, demand for natural gas increased further. China surpassed Japan to become world’s largest natural gas importer in 2018. According to the China Natural Gas Development Report 2019, natural gas consumption in China is expected to maintain an upward trend until 2050. Under a memorandum between China and Russia, the pipeline supply will continue for 30 years, which could meet long-term demand and help China’s environmental protection efforts.

Moreover, gas from Russia could improve the country’s energy diversification. China imported 90 million tons of natural gas in 2018, among which 40.5 percent was imported through pipelines and the remainder was liquefied natural gas (LNG). Central Asia and Myanmar are China’s main providers of natural gas, which arrives from these areas through pipelines. Natural gas from Australia accounts for more than 40 percent of China’s total LNG imports.

The China-Russia gas pipeline has added another supply alternative. More importantly, the pipeline benefits China’s northeastern and Beijing-Tianjin-Hebei regions, which have the most pressing demand for energy. Myanmar covers Southern China, and Central Asia provides for Western China.

Criticisms of the pipeline’s east route construction process were aired, however, particularly when its operational start date was postponed. Due to the complex, rough climate and geographical conditions along the route, both Chinese and Russian construction teams faced significant challenges. There were also negotiations and differences between companies on both sides. Citing these issues, some media repeatedly claimed that the pipeline project was doomed to become a failure. The completion of the project has proven that they were wrong, and that attempts to incite a dispute between China and Russia were in vain.

Despite this, further uncertainties down the road cannot be completely ruled out. Last year, two Central Asian countries, Turkmenistan and Uzbekistan, reportedly failed to comply with their contracts and abruptly cut supplies of natural gas to China. Whether or not the gas pipeline between China and Russia will hold a stable supply is therefore likely to be discussed excessively. Both sides have agreed that, with an annual supply increase, Russia will send 38 billion cubic meters of natural gas to China each year. The west route of the natural gas pipeline that has been in negotiations for years has an ambiguous future.

Through certain difficulties and uncertainties, China will continue its part in the pipeline project as its completion is important for both countries. For Russia, it will likely stimulate economic development in its Far Eastern Federal District. For China, it will be a key stretch that connects domestic energy networks, and a strategic move to improve energy security.

China is still highly dependent on foreign energy resources, particularly when it comes to crude oil and natural gas. This foreign dependence reached a record high in 2018, with almost 70 percent of oil and 45.3 percent of natural gas being imported. It is difficult to change this situation in the short term. In the long run, the country will have to become more independent in this area, which is possible considering the rich shale gas reserves in China.

Due to China’s large energy demand, the country needs to enhance domestic exploration of oil and gas. The country invested 20.5 percent more in its efforts year-on-year in 2018. Shale gas exploration has gained some headway. China should also develop technologies to exploit, store and utilize its shale gas resources more effectively.

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SOURCE: Read the Original Article on Globaltimes

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