April 21, 2020

Power of Siberia: A Natural Gas Pipeline Brings Russia and

China Closer
Overview Germany, Gazprom’s biggest and most important customer.
The “Power of Siberia,” the first natural gas pipeline to The pipeline runs almost solely through Russian territory,
bring Russian gas into China, began operations in resulting in Gazprom agreeing to finance the vast majority
December 2019. The pipeline’s initial capacity, 5 billion of the project.
cubic meters (BCM), would meet 1.3% of China’s 2018
natural gas consumption. As the pipeline reaches its full China’s Market
capacity of 38 BCM by 2025, natural gas likely will be able For China, the pipeline helps diversify its energy supply.
to displace coal in China’s northwest region in the long Initial volumes from Russia via the pipeline will be small
term. The Power of Siberia pipeline runs just over 1,400 relative to China’s gas consumption, which has almost
miles from Russia’s Chayanda natural gas field and tripled over the last decade (to 283 BCM in 2018). China
connects to China along the border of Heilongjiang produces about two-thirds of its gas needs domestically.
province; the pipeline will eventually extend from the
Kovykta field (another 400 miles) in Siberia (see Figure 1). In 2018, China imported 121 BCM of natural gas, with 60%
Congress may consider how this long-term energy coming by pipeline and 40% as liquefied natural gas
arrangement between Russia and China may affect U.S. (LNG). Of China’s pipeline gas imports, 70% came from
foreign policy and security. Turkmenistan. China also received gas by pipeline from
Kazakhstan, Uzbekistan, and Burma. China has multiple
Figure 1. Map of Power of Siberia Project LNG import terminals along its coast to access different
suppliers. In 2018, approximately 44% of China’s LNG
imports were from Australia. The United States ranked 6th
as an LNG supplier. China imported 1.3 BCM of LNG from
Russia.

The Power of Siberia pipeline project finally progressed

when, according to press reports, China offered Russia an
alternative market to Western Europe for its gas in the
context of sanctions and Russia capitulated on the price of
gas giving it a similar price to its most important customer,
Germany. Now that the pipeline is operational China has
added another significant source of natural gas supplies.
The opening of the pipeline also gives China another option
as its demand grows for new supplies.

Source: Modified by CRS, Gazprom,

Russia’s Diversification
http://www.gazprom.com/projects/power-of-siberia/.
Russia is the world’s largest exporter of natural gas,
primarily by pipeline. Russia continues to dominate the
Background European gas market, but growing demand from Asia and
In 2014, shortly after Russia invaded Ukraine, Gazprom, geopolitical risks in the west generated new interest in
Russia’s national gas company, signed a $400 billion building natural gas export infrastructure to China. Almost
contract with China National Petroleum Corp. (CNPC) to 80% of natural gas imports to Asia come by ship as LNG,
supply 38 BCM of natural gas annually for 30 years. The not by pipeline. This, in part, is because most countries in
project is the biggest contract in Gazprom’s history. the region, including China, are not connected by pipeline.

Russia and China had been talking for years about a natural Although in Russia’s east, the Power of Siberia should be
gas pipeline prior to signing an agreement, but could not viewed alongside other major Russian gas pipeline projects,
reach an agreement primarily on price. The pressure of including Nord Stream 2 and TurkStream. The Power of
western sanctions on Russia, according to some analysts, Siberia is mainly about customer diversification for Russia,
contributed to Moscow seeking to open a new market for its but similar to the other projects it is also about control of its
natural gas and show the west they had other markets for natural gas, not relying on transit countries, and locking in
natural gas exports. According to Bloomberg, Russian long-term partners. The opening up of Russia’s eastern
officials are reporting the price for the gas at a base of about regions to gas exports may help it mitigate the risks to its
$360 per thousand cubic meters, similar to the price paid by western exports. Russia has gas fields in the east, closer to
China than Europe, which it can now better exploit. The
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 Power of Siberia: A Natural Gas Pipeline Brings Russia and China Closer

pipelines and fields used to supply China’s gas are separate owned energy companies, signed a joint venture on
from the western Siberian fields that supply Europe. investing in natural gas projects.

U.S. Interests  China’s Huawei Technologies Co. struck a deal to

The cooperation required between Russia and China on the develop a 5G network in Russia.
Power of Siberia does not bode well for the United States
overall, and its individual relationship with either country. While these interactions demonstrate a strengthening
The agreement to construct the pipeline in 2014 was, between the two countries, they also may be motived by a
according to some analysts, in part a response to U.S. and common adversary—the United States.
European policies to sanction Russia over the invasion of
Ukraine, including the occupation of Crimea. The pipeline U.S. Natural Gas Relations with China
also came to fruition with the backdrop of various While China’s gas demand has been on the rise, so too have
investigations of Russian meddling in U.S. elections. U.S. LNG exports. Between 2016 and the first half of 2019,
U.S. LNG exports overall grew by 489%. In the first half of
Additionally, the trade dispute between the United States 2019, China’s imports of U.S. LNG declined by 83% over
and China is ongoing, despite some progress. In January the same time period in 2018, in part because of the trade
2020, the United States and China signed an agreement dispute between the countries. In May 2019, China imposed
known as the Phase One trade deal. Phase One would cut a 25% tariff on U.S. LNG, which led to a halt in U.S.
some U.S. tariffs on imported Chinese goods, while China exports to China. Despite the Phase One trade deal, China
would agree to purchase more U.S. energy and other goods. shows no sign of reducing or eliminating such tariffs,
Prior to the trade dispute, China was a significant buyer of making U.S. LNG uneconomical.
U.S. LNG exports and viewed as a growing market. For
2018, China ranked fourth (behind South Korea, Mexico, While the Power of Siberia may be of limited concern to
and Japan) as a top destination for U.S. LNG, comprising the United States at this time, the larger deal between
approximately 11% of all of U.S. LNG exports. Russia and China could be a harbinger of market trends and
a potential loss for future U.S. LNG exports. For instance,
Considerations the industry publication Platts projects that by 2023, nearly
The amount of gas that will be brought via the Power of 40% of Chinese gas demand growth will come from the
Siberia pipeline at full capacity, 38 BCM, will be 13% of Power of Siberia pipeline. For U.S. LNG exporters on the
China’s 2018 total demand. China would be Russia’s hunt for new opportunities, this could pose a setback.
second largest individual importer behind Germany, but
also significantly behind Europe in total (193 BCM of U.S. Natural Gas Relations with Russia
imports in 2018). Neither Russia nor China will likely have The Trump Administration’s attention to Russian natural
significant leverage over the other because of the Power of gas exports has not focused on China, but on the European
Siberia. Nevertheless, the pipeline, according to some Union’s dependence on Russian natural gas imports. Its
analysts, also was meant to send a message to the United efforts have focused primarily on two issues: promoting the
States. For Russia, it demonstrated that neither the United expansion of U.S. LNG exports to the EU and opposing the
States nor EU would stop Moscow from pursuing its Nord Stream 2 pipeline, which Russia is constructing to
interests. For China, the timing of the pipeline going into expand capacity to supply natural gas directly to Europe via
operation demonstrated that U.S. LNG is no longer as Germany (bypassing Ukraine). In December 2019, the
strong an incentive in the trade dispute. FY2020 National Defense Authorization Act (NDAA, P.L.
116-92) became law. It includes Title LXXV, the Protecting
Growing Russia/China Relations Europe’s Energy Security Act of 2019 (PEESA), which
Since 2014, Russia and China’s relationship has grown established sanctions related to the Nord Stream 2 and
stronger on a variety of issues, even more so since the U.S.- TurkStream pipelines.
China trade dispute. In addition to the Power of Siberia
pipeline, since 2018, several major deals and events have CRS Products
signaled a potential new dynamic in the Russia-China CRS Report R45988, U.S. Natural Gas: Becoming Dominant, by
relationship, including for natural gas: Michael Ratner.
CRS Report R42405, European Energy Security: Options for EU
 Chinese and Russian troops taking part in joint Natural Gas Diversification, coordinated by Michael Ratner.
maneuvers.
CRS Report R44483, China’s Natural Gas: Uncertainty for
 Russia-China trade reached a record level, exceeding Markets, by Michael Ratner, Gabriel M. Nelson, and Susan V.
$100 billion. Lawrence.

 China LNG imports from Russia more than doubled in Michael Ratner, Specialist in Energy Policy
2019. Heather L. Greenley, Analyst in Energy Policy

 Novatek, Russia’s largest independent natural gas IF11514

producer, and Sinopec, one of China’s largest state-

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 Power of Siberia: A Natural Gas Pipeline Brings Russia and China Closer

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