Russia's China Gas Deal: It May Get Cold In Europe

Wednesday, March 22, 2006

Russia's deal with China to build two natural gas pipelines within 5 years sends shivers through Europe. According to a report in ChinaDaily, the pipelines, originating in Siberia and Russia, will have an annual capacity of up to 80 billion cubic metres and cost $10 billion.
In 2004 China consumed 39 billion cubic metres. Russia is the world's biggest natural gas producer, pumping 578 billion cubic metres or 22% of world supply, according to the CIA.
Russia and China will also do a feasibility study for a $11.5 billion oil pipeline from East Siberia to the Eastern Pacific Coast, the report said.
Europe now has to fear that Russia will not be renew long-term gas deliveries in the future. Europe imports 24% of its natural gas demand from Russia. European leaders are expected to address the issue at their summit meeting in Brussels this week.
According to eurogas consumption in the EU rose 1.9% to 492.5 billion cubic metres in 2005. Europe's natural gas suppliers counted 103 million customers in 2005. Most urban households use natural gas for heating purposes.
Russia had cut gas imports to Europe by 40% for a couple of days around last new year's, citing problems with illegal drains in the Ukraine. This move reminded Europe of its high energy dependence towards Russia.

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