Gazprom said Thursday that it had moved closer to selling gas to China, one of the world's biggest energy markets, after offering an “updated” price during the latest talks with the China National Petroleum Company. The Chinese company, known as CNPC, also amended its position at the negotiating round in Kazan, Gazprom said without specifying when the meeting took place. Such talks appear to indicate that the countries haven't lost hope of agreeing on gas trade terms after many years of futile talks. Prime Minister Vladimir Putin and his Chinese counterpart Wen Jiabao attempted to renew the search for common ground in October.
Company delegations, led by Gazprom deputy chief Alexander Medvedev and CNPC vice president Wang Dongjin, “exchanged their updated price proposals that brought the sides closer” in their outlook for potential supplies, Gazprom said in a statement. The executives have already met once since October when their companies signed a framework agreement on gas sales to China. At the December talks, which lasted six days, they agreed on basic commercial and technical terms for the deal, CNPC said on its web site at the time. As bargaining continues, CNPC mentioned that China was pursuing plans to produce more shale gas inside the country, Gazprom said.
CNPC, along with Shell, began developing a shale-gas field in the Sichuan Province in November, saying it was China's first cooperation project to tap the unconventional reserves. It's unlikely that Gazprom's announcement of reaching some progress means that the sides broke through an impasse, said Alexander Nazarov, an analyst at Metropol. The price China is offering can't be much higher than what it pays to buy gas from Turkmenistan through a pipeline launched last year, he said. At that price, Gazprom will not recoup the costs of laying a pipeline to China, he said, suggesting that the route would be more expensive than the Turkmen line. Nazarov was doubtful that the talks had actually advanced much.
“You can change the date on a proposal and say it's updated,” he said, referring to the language of Gazprom's statement. “Sales to China are not realistic in the next 10 years.” Putin said in October that China agreed to link the price of any future gas deliveries from Russia to the price of oil products in Asia. Prior to the attempts to produce shale gas, China had been rapidly developing its conventional natural gas reserves. Its gas production has been recently increasing by 10 billion cubic meters annually, CNPC said on its web site, adding that the rate — impressive by industry standards — was insufficient to meet the growing consumption. China is also importing liquefied natural gas, or LNG, from Australia, Malaysia and Indonesia where its energy companies partnered with local or international players such as BP and Petronas.