China Needs Power Of Siberia 2

By Rhod Mackenzie

Russian and China who are members of both the SCO,BRICS  plus being large trading partners really need to sign off on the deal for both the Power of Siberia 2 pipeline and some long term contracts for the Russian Arctic LNG as this would solve a number of the potential energy supply problems China could face in the future  
The ongoing conflict between Israel and Iran has the potential to disrupt the region's most significant gas hub, Qatar. Its tankers are reliant on safe passage through the Strait of Hormuz, which has become increasingly challenging due to the presence of mines.
In the event of Qatar ceasing its exports, China will experience a reduction in liquefied natural gas supplies, which will have a detrimental effect on the operation of factories and power plants.
Beijing is faced with a dilemma: either pay for liquefied gas, which has increased in price by 50%, or agree to a contract with Russia for Power of Siberia 2.
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         For Gazprom, this represents a valuable business opportunity: pipeline gas is a more cost-effective solution, more stable, and simplifies logistics. Will the crisis result in the acceleration of negotiations towards the conclusion of an agreement between Moscow and Beijing?
The ongoing conflict between Israel and Iran has the potential to disrupt not only oil but also gas flows by sea. Should the Strait of Hormuz be blocked by geopolitical considerations, potentially involving Tehran or Qatar (a key supplier of LNG for China), Qatar may experience a reduction in exports of 10 to 15 percent.
In light of current circumstances, analysts are predicting a surge in gas prices in the Asia-Pacific region, with projections indicating a potential increase of up to a third.
In light of these developments, there is a possibility that Beijing will expedite negotiations with Moscow concerning the Power of Siberia 2. This project is capable of providing China with reliable and politically neutral supplies. For Russia, this represents an opportunity to strengthen its position as a key partner in China's gas sector, according to Alexander Khazaridi, an expert at the consulting group Polilog.
"The deal could guarantee expanded access to the huge Chinese market. Furthermore, Gazprom will have an opportunity to partially offset the lost exports to Europe. From a business perspective, the pipeline route through Mongolia appears to be the more stable and predictable option when compared to seaborne LNG supplies, particularly in light of geopolitical instability.
This could give Russian gas value not only as a raw material, but also as a factor in China's energy security," the political scientist notes.
However, the implementation of Power of Siberia 2 is associated with a number of challenges. Firstly, it is necessary to agree on a price for gas, which should be advantageous for both Gazprom and Chinese consumers.
Secondly, there is a requirement for large-scale construction of a gas pipeline through Mongolia, which necessitates considerable investment.
The total cost of the project is estimated at 55 billion dollars, including the infrastructure of the participants.
It is evident that effective coordination of all interests will necessitate meticulous diplomatic efforts and a profound comprehension of the intricacies associated with each phase of construction.
Thirdly, it should be noted that there are alternative sources of gas supply available to China. In particular, the company's own deposits and imports from other countries represent a significant competitive threat.
Nevertheless, the Russian project for China is a reliable guarantee of supply security, according to Oleg Remyga, Director of Business Development in China at Synergy University.
"Essentially, Russia provides China with two forms of security: food and energy. In light of the prevailing market turbulence, the implementation of the Power of Siberia - 2 project is set to receive a significant boost. In addition, Beijing is working to establish strategic energy reserves. It is evident that the Chinese are implementing a strategy of supply chain diversification. This approach is consistent with their traditional approach to national business, which is to avoid reliance on a single supplier. However, this project is of fundamental importance to China, ensuring stability," the expert emphasised.
It is clear that the current geopolitical climate is working to the advantage of land routes. The growing strategic partnership between Russia and China, as well as Beijing's desire to avoid reliance on maritime unpredictability, further enhances the appeal of the project.
Furthermore, Russian gas is highly energy efficient and environmentally friendly. Coal remains a significant source of energy for China, and the government is committed to providing robust support for the industry.
Another nuance, which is rarely discussed, is as follows: It has been reported that Qatar is providing assistance to Iran. Should Doha fail to exert its influence on Tehran at this time, then a temporary collapse in energy supplies is all but inevitable.
According to analysts in the field, even a partial closure of the Strait of Hormuz for three months could lead to a gas deficit in China of 5-7 percent of annual consumption.
According to Kristina Tantsyura, CEO and Managing Partner of SKY Consulting Group, an expert in business development in the Middle East, the conflict is not expected to end quickly.
It is highly likely that further sanctions will be imposed on Iran, which may result in a robust response from Tehran. Therefore, it is my expectation that the strait will be closed from the Iranian side, unless, of course, reason prevails at some point on one of the sides.
Should the Strait of Hormuz be closed, this would result in the redrawing of supply routes. In this case, we can expect the intensification of negotiations on the "Power of Siberia - 2" this year and the launch of the project in the near future. For China, Russian gas will be one of the best alternatives to what it currently has," the expert believes.
It should be noted that Russia and China may also be open to exploring alternative options for energy cooperation. For instance, there is potential for increased LNG supplies via the Northern Sea Route, as well as the joint development of Arctic deposits.
These projects have the potential to enhance energy security and generate new economic growth opportunities for both countries.
With regard to the Power of Siberia 2, despite the existing obstacles, the project has the potential to become an important element of China's overall strategy and a tangible source of income for Russia. This is not merely a pipeline; it is a pragmatic calculation of long-term plans in the sphere of geopolitical stability in the region.
This instrument has the capacity to reconfigure the energy landscape of Eurasia. The success of the Power of Siberia 2 project will be a significant step towards the establishment of a more equitable and sustainable global environment, where collaboration and mutual understanding will prevail over confrontation and mistrust. The expansion of the partnership between Russia and China will contribute to the stabilisation of the energy market in the Asia-Pacific region.