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What It's All About: Russia, China Begin Construction Of World's Largest Gas Pipeline

Tyler Durden's picture




 

If after months of Eurasian axis formation, one still hasn't realized why in the grand game over Ukraine supremacy - not to mention superpower geopolitics - Europe, and the West, has zero leverage, while Russia has all the trump cards, then today's latest development in Chinese-Russian cooperation should make it abundantly clear.

Overnight, following a grand ceremony in the Siberian city of Yakutsk, Russia and China officially began the construction of a new gas pipeline linking the countries. The bottom line to Russia - nearly half a trillion after China's CNPC agreed to buy $400bn in gas from Russia's Gazprom back in May. In return, Russia will ship 38 billion cubic meters (bcm) of gas annually over a period of 30 years. The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world.

As BBC reports, "the deal will lessen Russia's dependence on European buyers, who have imposed economic sanctions because of the crisis in Ukraine." That is not news and has been known for months ever since the long-anticipated Holy Grail deal was signed in May. More importantly, as Zero Hedge reported last week, one awaits as the invoices become increasingly less denominated in USD, and more in CNY or RUB. Most importantly, and confirming the significance of Russia's pivot away from Europe, which ultimately can have Qatar's gas it so very desires, irrelevant how many thousands of innocent people have to die, the construction ceremony was attended by Russian President Vladimir Putin and Chinese Vice-Premier Zhang Gaoli.

China will start work on the construction of its side of the pipeline in the first half of 2015, Mr Zhang said.

 

The first gas will be pumped from Siberia to north-east China in early 2019.

 

Over the past 10 years, China has used other gas suppliers. Turkmenistan is now China's largest foreign gas supplier. Last year, it started importing piped natural gas from Myanmar.

Increasingly it appears that China will defer to Russia when it comes to cementing bilateral commodity deals, especially if it means further distancing both sides from what has emerged as a natural foe to both aspirational nations: the United States.

Here is what Putin had to say about the latest gas pipeline, soon to be the world's largest, during the groundbreaking ceremony outside the city of Yakutsh, via RT: "The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and above all - our key partner China."

Once we create a gas pipeline network here in the Far East and Siberia, we will be able to connect European pipeline system to the East. And this, in terms of export opportunities and expanding Russia’s ‘gasification’, is very beneficial. Depending on the situation in world markets, we can more effectively implement gas flows- either more to the West or to the East,” Putin told students at North-Eastern Federal University earlier on Monday.

More:

 Both President Putin and Vice Premier Zhang Gaoli signed the freshly-welded pipeline in a time-honored Russian tradition. The 'Power of Siberia' was welded together by workers from Chayanda gas field, overseen by CEO Aleksey Miller.

 

"Gazprom is always a reliable supplier of gas to its customers - which also applies to the ‘Power of Siberia," Miller said.

 

The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world. Both Putin and Vice Premier Zhang Gaoli have called the project the world’s largest construction project, as investment from both countries will be more than $70 billion.

 

“The gas pipeline ‘Power of Siberia’ will increase energy security and ensure Russia’s ability to fulfill export obligations,” Putin said in the opening remarks.

 

Starting in 2019, Power of Siberia will pump gas from Siberia to China’s populous northeast region as well as to Russia’s Far East. The Chinese side will start the construction of its part of the pipeline in the first half of 2015, the Vice Premier of China said.

 

Last year, China consumed about 170 billion cubic meters of natural gas and expects to consume 420 billion cubic meters per year by 2020. Europe still remains Russia’s largest energy market, buying more than 160 billion meters of Russian natural gas in 2013.

So while the west is no longer able to find any growth opportunities, with the marginal free cash flow dollar increasingly going in stock buybacks, Russia has no such problems: running from the Chayanda gas field in the Republic of Yakutia, the cost of construction is estimated at more than $20 billion (770 billion rubles), which includes other investment in the region of $7.5 billion (283 billion rubles). Russia’s largest steel pipeline manufacturer, TMK, will provide materials for the project.

The gas pipeline will become a common transit center for gas production centers in the Yakutia and Irkutsk regions.

 

The first stage of the project will be to transport gas from the Chayanda deposit in Yakutia and connect to the town of Blagoveshchensk on the Chinese border. The 968 km pipeline should be completed by 2018.

 

The Chayanda field, which will begin production in 2015, is estimated to have reserves of 1.2 trillion cubic meters in gas and 93 million tons of liquid hydrocarbons. Each year the field is expected to produce up to 25 billion cubic meters of gas and at least 1.5 million tons of oil.

 

Putin also said that China can become a shareholder in the Vankor oil and gas fields in the Krasnoyarsk region in Eastern Siberia. China will enter into a strategic relationship with Rosneft, Russia's largest oil company, which owns the field.

But, Obama keeps repeating Russia is isolated by the entire world... Is he once again simply, gasp, lying?

To summarize all of the above: while Europe will continue to depend on Russia for its gas imports indefinitely, Russia will no longer depend on Europe for its experts.

Finally, a video of today's festivities if only for Russia, not so much the countries which are "isolating" it...

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Mon, 09/01/2014 - 13:16 | 5168005 ninja247
ninja247's picture

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Gazprom Gazprom Gazprom !!!

Mon, 09/01/2014 - 13:17 | 5168011 Soul Glow
Soul Glow's picture

King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  King Dollar !!!  

Mon, 09/01/2014 - 13:22 | 5168026 knukles
knukles's picture

Watch!
Mark my words.
The EU says no more buying Russian Debt
Russia says no more buying Russian Oil and Gas with Other Than Rubles OR Gold.

 

Mon, 09/01/2014 - 13:29 | 5168032 Pinto Currency
Pinto Currency's picture

 

PETROGOLD.

Watch the new Shanghai Gold Exchange in the free trade zone opening on Sept 26.

Meanwhile Barry wants to know what Pooti's golf handicap is.

Mon, 09/01/2014 - 14:12 | 5168220 Latina Lover
Latina Lover's picture

Barry secretly dreams of playing Italian Golf with Putin, putter in the holes, balls outside.

As they say in America, when your head is in the ground (ostrich style), your ass is sticking out. 

C'mon Putin, do it for world peace, LOL.

Mon, 09/01/2014 - 15:12 | 5168463 0b1knob
0b1knob's picture

" largest fuel network in the world."!

Didn't some smart guy once observe that the last stage of a civilization was giganticism?   Building THE BIGGEST THINGS EVER.  Pipelines have be beneficial in the past so a GIANT one will be even better.

Winter is coming....  Spengler says so.

Winter: Coming fissure in the world-urban civilization. Exhaustion of mental organization strength. Irreligiousness rises.

  • Religion: Materialism: Cults of science, utility, and luck. Ethical-social ideals: philosophy without mathematics, skepticism. The last mathematical thinkers. Decline of abstract thinkers, and the rise of specialized academic philosophy. Spread of the last ideas.
  • Art: End of symbolic art. All art becomes meaningless subjects of fashion.
  • Politics: Democracy, meritocracy, plutocracy, followed by caesarism and bureaucracy.

 

 

 

 


 

Mon, 09/01/2014 - 15:35 | 5168539 MalteseFalcon
MalteseFalcon's picture

Why would the Russian media report on some silly old pipeline?  I'm sure the Russian people would much rather hear about the state of gay marriage in Russian or the size of Kim Kardashian's ass.

Mon, 09/01/2014 - 15:37 | 5168546 DonutBoy
DonutBoy's picture

There you go with giganticism again

Mon, 09/01/2014 - 15:52 | 5168594 BurningFuld
BurningFuld's picture

Kim Kardashian has an ass? I thought we had two new moons.

Mon, 09/01/2014 - 16:02 | 5168617 strannick
strannick's picture

Chinese manufacturing, meet Russian resources.

World's most populous nation meets the world's largest.

"He who controls the world island..."

Mon, 09/01/2014 - 16:18 | 5168665 buyingsterling
buyingsterling's picture

From the article: "the world's largest fuel network in the world"

said Dana Carvey as Mickey Rooney

Mon, 09/01/2014 - 17:29 | 5168875 Keyser
Keyser's picture

2019 is a long way off... Lot's of mishaps could occur during construction... You know, spooks, jackals, boogiemen, islamic terrorists, etc... Just saying... 

 

Mon, 09/01/2014 - 17:43 | 5168940 Publicus
Publicus's picture

Petrogold won't happen for the simple reason the USA produce more gold than Russia.

 

Petrolruble on the other hand will happen as the USA can't print Ruble at all.

Mon, 09/01/2014 - 19:51 | 5169322 August
August's picture

If Russia and China can avoid a major war (i.e. either with the Anglo-Zionist State, or with each other), they will inherit the mantle of World Domination from the current holders.

I'm not claiming that Sino-Russian Hegemony is going to be "better" than Anglo-Zionist Hegemony.  A Sino-Russian world-order will be inferior to what an American-led world could have been, if American elites had made different choices.  Guess the money - "dynastic money" - was just too good.....

Mon, 09/01/2014 - 22:22 | 5169778 Four chan
Four chan's picture

some drunk's milkshake is gonna get drank.

Mon, 09/01/2014 - 23:47 | 5169987 Drunk In Church
Drunk In Church's picture

And they'll be building that pipeline with Yankee dollars.  You can bank on it.

Mon, 09/01/2014 - 17:55 | 5168999 BandGap
BandGap's picture

Um, reminds me of the book, Red Storm Rising by Tom Clancy.

We live in very interesting times.

Tue, 09/02/2014 - 00:19 | 5170053 matrix2012
matrix2012's picture

Nope, I believe the sheep en masse lustfully wanna know the size of Kim Kardashian's boobs,,,not her ass!

Mon, 09/01/2014 - 16:07 | 5168633 Anusocracy
Anusocracy's picture

.

gigantism

Mon, 09/01/2014 - 18:48 | 5169149 gallistic
gallistic's picture

0b1knob , you should have mental masturbation sessions with fellow Spenglerian fetishist, Goose Shteppin Moron.

I am sure you would both climax and ejaculate morphologies of history.

Mon, 09/01/2014 - 18:56 | 5169195 SilverRhino
SilverRhino's picture

Money people see pipelines.    Generals see avenues of invasion. 

Military logisticians see pre-surveyed railway / roadway beds.

Mon, 09/01/2014 - 20:42 | 5169456 grunk
grunk's picture

WalMart sees demographics and intersctions.

Mon, 09/01/2014 - 20:46 | 5169461 Wait What
Wait What's picture

i hear Lake Baikal is beautiful this time of year.

might be time to head on out to Siberia-Mongolia to find out if it's true.

Privet moy drug!

Mon, 09/01/2014 - 13:36 | 5168095 Escrava Isaura
Escrava Isaura's picture

 

 

I hate when they build pipelines without using my 401k.

Where am I gonna get income later on?

Mon, 09/01/2014 - 13:41 | 5168118 Renewable Life
Renewable Life's picture

Unless the EU and NATO is prepared to think they can "WIN" a war against China and Russia simultaneously..........

They won't be doing shit, now saying shit, that's what we do best!

Mon, 09/01/2014 - 13:44 | 5168129 RiverRoad
RiverRoad's picture

Should have left them planting cabbages and rice.  Pretty stupid of us.

Mon, 09/01/2014 - 17:46 | 5168958 RafterManFMJ
RafterManFMJ's picture

Da FUCK do you mean, us?!

Mon, 09/01/2014 - 18:23 | 5169085 RiverRoad
RiverRoad's picture

To put a finer point on it.....Nixon and his bankster buddies.

Mon, 09/01/2014 - 21:21 | 5169566 NidStyles
NidStyles's picture

Odd I don't see my name on that list... So why is it "us" if none of "us" actually took part.

Mon, 09/01/2014 - 13:52 | 5168168 RSloane
RSloane's picture

Won't argue with that one. They may go with a 'basket of currencies' that will include the REM and of course physical gold and silver. Russia and china both have trade agreements with South American countries [you know, those neighbors of the US that the US just keeps insulting and pissing off] which include similar baskets, of course also using the currency of whichever country the agreement is being made with.

The US should have taken up the president of Ecuador Rafeal correa's offer of  two million USD to study global relations after his plane was grounded by the US while they were searching for Snowden.

 

Mon, 09/01/2014 - 15:17 | 5168467 debtor of last ...
debtor of last resort's picture

Clean float / freegold is a good thing. But maybe gold is for countries an cb's only. And they let us compete our asses of while looking at the phony paper price...

Mon, 09/01/2014 - 15:39 | 5168561 crazzziecanuck
crazzziecanuck's picture

It was the Bolivian President's plane that was grounded to search for Edward Snowden.

Correa is playing host to Assange in London.

Mon, 09/01/2014 - 16:34 | 5168704 tonyw
tonyw's picture

[you know, those neighbors of the US that the US just keeps insulting and pissing off] 

it seems as though the US is pissing off nearly all countries whether neighbours or not

Tue, 09/02/2014 - 01:56 | 5170186 matrix2012
matrix2012's picture

Chinese renminbi = RMB (which is just another reference for yuan = CNY)

Mon, 09/01/2014 - 15:44 | 5168572 pkea
pkea's picture

putin: checkmate, USSA

Mon, 09/01/2014 - 16:05 | 5168628 LawsofPhysics
LawsofPhysics's picture

Really want to see how South America weighs in.  They are huge exporters to the American refineries.

 

tick tock...

Mon, 09/01/2014 - 13:23 | 5168027 Pinto Currency
Pinto Currency's picture

-

Mon, 09/01/2014 - 13:51 | 5168161 The Wizard
The Wizard's picture

Did you notice they used a petrodollar valuation to determine the size of the deal. If they are truly going to dump the petrodollar reports are going to have to show a different form of valuation.

Mon, 09/01/2014 - 13:56 | 5168178 RSloane
RSloane's picture

Agreed, and from what I've been reading, they are actively working on it. I believe the trade minister of china referred to the process as "weaning".

Mon, 09/01/2014 - 13:57 | 5168179 CCanuck
CCanuck's picture

Hey Wizard, that valuation was for your consumption not theirs.

Mon, 09/01/2014 - 14:20 | 5168271 Lore
Lore's picture

@ Wizard: You're reading news releases published for WESTERN consumption. Local audiences couldn't care less.

Mon, 09/01/2014 - 15:15 | 5168475 The Wizard
The Wizard's picture

Like duh, I realize it is for Western consumption. However, I would assume the 400bn is based upon the existing petrodollar valuation in both rubles and yuan. Bottom line is they are still using petrodollar valuation as a basis. Good comment on the weaning, though I would guess they have been trying to figure out how to wean for a good number of years. This guy appears to have some interesting insights.

http://philosophyofmetrics.com/

Mon, 09/01/2014 - 15:22 | 5168491 Winston Churchill
Winston Churchill's picture

Its a good site.Collins needs to read a little more Machiavelli to understand

how human nature really works.

Mon, 09/01/2014 - 15:25 | 5168507 Stumpy4516
Stumpy4516's picture

If all the world valued every transaction in dollars but in all the world NO ONE used dollars to make the transaction, what would the dollars status be?

Mon, 09/01/2014 - 15:28 | 5168515 The Wizard
The Wizard's picture

Exactly.

Mon, 09/01/2014 - 15:45 | 5168576 giggler321
giggler321's picture

on a lighter note - that marker pen business reminds me of school; writing on the bog walls with u'r pal's. bush4clinton and all that.  

Mon, 09/01/2014 - 15:52 | 5168597 phaedrus1952
phaedrus1952's picture

mmm ... that's not one of them thar "tree falling in the empty woods making a sound? type questions, is it?

Mon, 09/01/2014 - 15:52 | 5168595 unnamed enemy
unnamed enemy's picture

in the russian news the number is reported as 770 billion rubles, no mention of dollars whatsoever. 

ehtnocentrism much?
Mon, 09/01/2014 - 17:50 | 5168973 RafterManFMJ
RafterManFMJ's picture

Trigger word alert.

Check your privilege, White man!

Mon, 09/01/2014 - 17:52 | 5168988 Dugald
Dugald's picture

 

ehtnocentrism much?

Ethno, got it? Ethno.......

What? you are so arrogant that you don't bother to check your typing?


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