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Gazprom and PetroChina restore dialog on gas price

Gazprom to study underground gas storage in China

 Last May, China and Russia had terminated lengthy negotiations on their natural gas trading prices to drive the constructions of multiple gas pipelines between the two countries.

China had made its best efforts to increase its offer from $0.235 per cm to $0.250 while Russia was ready to accept $0.300 per cm instead of $0.350.

But the five cents gap per cf was still there.

Now PetroChina (CNPC) and Gazprom have got the mandate to investigate another scenario where Gazprom would help China to develop potential underground gas storage (UGS) opportunities.

Since 2004, Gazprom and PetroChina have signed an Agreement of Strategic Cooperation to support a technical and scientific cooperation related to natural gas and LNG arrangements between Russia and China.

Under this frame, PetroChina suggested Gazprom to provide technical support for the construction of large gas storage farms in the Northeast and Northwest of China.

With this perspective, Gazprom and PetroChina are working on setting up a joint venture to run gas transmission and distribution in China.

Dagang: first school case for gas storage conversion

The Gazprom and CNPC joint venture is considering the Dagang oil fields  to revamp and upgrade the gas storage facility.

Dagang is already storing  1.7 billion cm natural gas.

Because of its centric position in China, Dagang has the largest gas storage capacity in China.

If proven successful, this experience could be repeated in other potential storage location in China in beginning with the Xinjiang province, in the Northwest of China.

In driving Gazprom downstream in the natural gas distribution system in China, CNPC expects to benefit from the Russian expertise to improve performances and from lower prices on gas.

In return Gazprom should take advantages of the shared interests within the joint venture in charge of the operations.

If Gazprom and CNPC could settle a deal based on this technical and commercial co-operation, Russia and China could then proceed with the construction of the two giant natural gas pipelines planned since 2006 to connect West Siberia and East Siberia to China.


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