Gazprom to Boost China Exports, Isn’t Seeking Output Allies

OAO Gazprom (OGZD), the largest natural-gas producer, seeks to boost exports to China rather than bringing partners from the Asian nation into Russian drilling projects.

“We’re talking about gas supply with Chinese companies,” Deputy Chief Executive Officer Vitaly Markelov said in Moscow.

Russian President Vladimir Putin is turning toward Asia as capital flows from the country surge and the U.S. and European Union restrict access to funds due to a conflict over Ukraine. China, Russia’s largest trading partner with $94.5 billion of business last year, was the only country in the United Nations Security Council not to censure Putin’s annexation of Crimea.

Gazprom is preparing a supply contract with China that it aims to sign when Putin visits the country next week, Deputy Energy Minister Anatoly Yanovsky said on May 12. It plans to deliver as much as 38 billion cubic meters of gas no sooner than the end of 2018 after more than a decade of talks and false starts.

The contract is 98 percent ready, Yanovsky said.

The two sides are still discussing the key issue of price, Zhang Xin, a spokesman for China National Petroleum Corp., said today in Beijing, according to the Interfax newswire.

“Rumors that the Chinese side is trying to use current events in Ukraine to secure a reduction in the price of Russian gas are in no way true,” Zhang said, Interfax reported. Gazprom Chief Executive Officer Alexey Miller will travel to Beijing to try reaching a deal before Putin’s visit, the spokesman said.

While Gazprom has few foreign partners at production sites in Russia, state oil producer OAO Rosneft (ROSN) has signed a spate of deals with U.S., European and Asian companies to try to ramp up exports. In October, Rosneft said it planned to sell 49 percent of an East Siberian oil venture to CNPC after the two signed a $270 billion 25-year oil supply deal earlier in the year.

PetroChina Co. (857), CNPC’s publicly traded unit, is interested in spending at least $10 billion for a minority share of East Siberian gas fields operated by Gazprom and Rosneft, people with knowledge of the matter told Bloomberg in September.

To contact the reporter on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Torrey Clark, Tony Barrett

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