China, Russia agree on terms of multi-billion dollar gas deal

The long-awaited major gas contract between Russia and China is close to being sealed. The nations' energy corporations signed a string of agreements on energy cooperation on Thursday.

The signings took place after President Vladimir Putin and his Chinese counterpart Xi Jinping met at the G20 summit in St. Petersburg.

Russia’s Gazprom and the China National Petroleum Corporation (CNPC) signed basic conditions for the long-term deal. Russia will supply at least 38 billion cubic meters of gas per year to China, Gazprom said in a press release.  The agreement terms cover the start date and volume of gas deliveries, the take-or-pay level, the amount of guaranteed payments, and the gas transfer point. However, the companies didn’t specify a solution to the main stumbling block – the issue of price.

Gazprom reported that the deal is expected to be finalized by the start of 2014. The project also envisages the construction of a new Russian pipeline to China by 2018.

The two sides have consistently failed to agree on the issue of price for years, prompting China to sign massive gas deals with other exporting nations including Australia, Qatar, and Turkmenistan, RIA Novosti reported.

CNPC has also signed a deal with Russia’s largest independent gas producer Novatek on buying into its subsidiary, Yamal liquefied natural gas (LNG) plant, which is due to open in 2016. China has signed a deal to acquire a 20 percent stake in the plant, according to CEO of Novatek, Leonid Mikhelson. The two companies are now discussing how much liquid natural gas that CNPC will purchase, he added.