China Postpones Deal On Russia’s Alati Gas Pipeline Due To Economic Slowdown

The signing of the gas supply contract with China via the Altai pipeline, known as Power of Siberia 2, is being postponed for an indefinite period, Vedomosti newspaper reports.

Ukok Plateau, Southwestern Siberia, the Altai Mountains region of Russia near the borders with China, Kazakhstan and Mongolia. Courtesy of Wikipedia.

The Russian news agency cited two federal officials explaining that China is reviewing its energy needs due to the economic slowdown.

The move is a significant blow to Russia as back in Q1 this year the contract was seen as imminent.

Under current market conditions, it is now more advantageous for China to buy LNG from Australia,  Valery Nesterov, an analyst from Sberbank, said.

• Between 2012-2013 the consumption of gas in China grew by 12% and 13%.
• In 2014 the growth rate was at the level of 8.5%.
• However, during the first six months of 2015 consumption grew by only 2%, according to BP reports.

Russia’s Power of Siberia-2 route, previously known as the Altai route, is expected to supply 30 billion cubic meters (bcm) of gas a year to China. The new supply line comes in addition to the eastern route called the Power of Siberia pipeline, which will annually deliver 38 bcm of gas to China. Work on that pipeline has already started  after a $400 billion deal was clinched in May 2014. The pipeline, the world’s largest, is scheduled to begin delivering 5 billion cubic meters of gas to China in late 2018, and become fully operationally in 2019.