Russia Expects to Sell Gas to China at Half the Price for Europe

Russia expects to sell its pipeline natural gas to China at almost half the price for Europe in the next three years.

(Bloomberg) — Russia expects to sell its pipeline natural gas to China at almost half the price for Europe in the next three years.

The gas price for China is expected to average $271.6 per 1,000 cubic meters next year compared with an average of $481.7 for clients in Europe and Turkey, according to the economic outlook through 2026 filed to Prime Minister Mikhail Mishustin on Friday and seen by Bloomberg News.

The price gap is seen remaining at the same extent through 2026 with gradual reductions for both regions, the forecast showed.

The government’s estimates shed light on a $400 billion contract, the biggest ever for Russia’s gas giant Gazprom PJSC, to supply natural gas to China National Petroleum Corp. via the Power of Serbia link. The price parameters weren’t previously made public, with President Vladimir Putin only saying that gas via the pipeline would be linked to oil prices.

Russia has been intensifying its energy ties with China for years amid the standoff with the West over the annexation of Ukraine’s Crimean peninsula, followed by the invasion of Ukraine in February 2022. The importance of China has increased for Gazprom after the producer capped flows to Europe, once its biggest market.

The media service for the Russian government didn’t immediately respond to a Bloomberg request for a comment sent Friday outside normal working hours.

Energy Ties

Last year, Russia sold gas to China at an average price of $277.1 per 1,000 cubic meters, while the price for Europe and Turkey averaged $983.8. For the European market, the share of contracts linked to spot and forward prices has significantly increased in recent years, with prices hitting records in 2022 amid Europe’s energy crunch.

This year, Russia expects to sell its gas to China at an average $297.3 per 1,000 cubic meters, compared with an average of $501.6 for Turkey and remaining European clients.

Russia sees its pipeline gas exports at 97 billion cubic meters this year, down from more than 131 billion cubic meters in 2022. Volumes are expected to rise to 126 billion cubic meters in 2026 amid a gradual increase in supplies via the Power of Siberia connection.

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