Gazprom Discusses Gas Pipe Loan in ‘Difficult’ Talks With China

OAO Gazprom, the world’s biggest natural-gas producer, is discussing a possible loan from China to help build a $25 billion pipeline to supply the world’s fastest-growing major economy as demand in Europe weakens.

While China has confirmed volumes it’s seeking to buy from Gazprom, the talks remain “difficult” because of disagreements over price, Gazprom Chairman Viktor Zubkov said in Moscow today. He declined to disclose the size of the possible loan.

“On price, it is very difficult,” Zubkov said at the National Oil and Gas Forum. “But I think they will agree eventually.”

Gazprom said last month it plans to sign a contract with China National Petroleum Corp. after almost a decade of talks to supply as much as 68 billion cubic meters of gas a year. The company is seeking markets in Asia as European demand stagnates because of the economic slowdown and a switch to cheaper coal. Chinese President Xi Jinping will visit Russia this week.

Credits for Russian fuel supplies in the shape of loans or advance payments are “always” part of the oil and gas talks, Deputy Prime Minister Arkady Dvorkovich said at the same forum today.

Gazprom will stick to its principle of linking the gas price to the price of crude and oil products in talks with China, said Zubkov, a former first deputy prime minister.

Gazprom plans a 3,200-kilometer (2,000 mile) pipeline from fields in East Siberia to the port of Vladivostok, at an estimated cost of 770 billion rubles ($25 billion). It also plans a gas liquefaction plant at Vladivostok and may cooperate with CNPC on that project, it said on Feb. 27.

Russia and China are also discussing an increase in oil supply to China via a branch from the Eastern Siberia-Pacific Ocean pipeline and the Kazakh route, Dvorkovich said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE