Sino-Russian Natural Gas Payment Method to Be Determined

On May 22, CNOOC President Wang Dongjin stated: “(The Sino-Russian Natural Gas Agreement) did not involve prepayments, and the Russian side actually made this request to us, but the advance payment is more complicated and needs the approval of the government, but it does not rule out the next negotiation. Involving this issue."

On the same day, the 2013 annual general meeting of China National Petroleum Corporation (601857.SH) was held. Chairman Zhou Jiping and Wang Dongjin attended the meeting. Wang Dongjin revealed that the import price of natural gas in Russia is "competitive in the future development of China's natural gas market."

After 10 years of Sino-Russian natural gas negotiations, they signed a relevant agreement with May 21st. However, according to Wang Dongjin, there are still unresolved issues in the negotiations, which still require the efforts of both parties.

On the issue of gas price reform triggered by the inversion of imported gas and domestic gas prices, Zhou Jiping also responded at the general meeting of shareholders. He said that the domestic natural gas price reform will be in place before 2015. By then, China’s oil imports will suffer a huge loss of natural gas. The situation will be eased or even completely reversed.

Natural gas negotiations will continue

Zhou Jiping and Wang Dongjin both rushed from Shanghai to Beijing after 23 o'clock on the 21st. In the past few hours, Zhou Jiping just signed on behalf of PetroChina and the president of Russia's Natural Gas Industry Co., Ltd. ("Russian") Alex Müller. Sino-Russian Eastern Gas Supply and Purchase Contract.

This does not mean the end of the negotiations. "The agreement did not involve advance payment. The Russian side did indeed make this request, but the advance payment is more complicated and needs the approval of the government, but it does not rule out this issue in the next negotiation," Wang Dongjin admitted.

Earlier foreign media said that before the negotiation of the contract was reached, Russia once requested that China pay the prepayments for gas purchases for the next year in advance each year. At present, Russia’s demand for Ukraine is to pay ahead of schedule, or to use the previous oil trade between China and Russia. In that way, exchange natural gas for **.

However, PetroChina still resisted the pressure from Russia and did not agree to this clause in the signed agreement.

For the prepayment model, Russia has applied it to Ukrainian gas supplies. It is understood that on 13 May, Russian Gas issued a prepayment notice to Ukraine, which has issued an advance bill of approximately US$ 1.66 billion to Uzbekistan according to the 114 million cubic meters of air supply per day in June. The Russian Gas Group emphasized to Uzbekistan that the final payment date of this payment is June 2. If it cannot pay in full, the Russian gas will supply a corresponding amount of natural gas according to the amount paid by Uzbekistan.

“This means that Uzbekistan needs to pay Russia at the minimum amount of 114 million cubic meters per day that it has previously signed. If it exceeds it, it will pay Russia at the excess price; if not, Russia will not Return 114 million cubic meters / day deposit, this is the Take-or-pay Contract (must pay contract)." A CNPC source said.

The "** change oil" agreement that Chinese readers are more familiar with is that before the two parties' transactions have yet to start, they will pay Russia a sum of money for the development of Russian oil pipelines or related oil fields. The volume of trade is offset by the previous **."

The above-mentioned CNPC sources believe that these two methods are very favorable conditions for Russia. “Especially at the moment when Russia and the EU are in conflict with the Ukrainian issue and Russian capital flows out in large numbers”, PetroChina does not promise to pay in advance. Fees or ** are undoubtedly safeguarded the interests of the Chinese side.

“Because the Qiyangda gas field at the end of 2015 and the 'Siberian power' pipeline for gas transmission to China began construction, the details will be negotiated between China and Russia and it is not ruled out that Russia will continue to apply to the Chinese side on this issue. Pressure." The above-mentioned CNPC sources said.

However, the overall situation of Sino-Russian gas supply has been irreversible, and China has obtained the "competitive price in the Chinese market" as a foregone conclusion.

Natural gas price reform in place in 2015

In fact, behind the signing of the Sino-Russian Natural Gas Agreement is the further acceleration of the development strategy of CNPC's natural gas.

It is understood that due to the influence of China's natural gas price policy in the past, oil-capital enterprises, including PetroChina, often take advantage of the purchase opportunities of natural gas and LNG. As a result, oil-capital enterprises often have to become “payers for high prices”.

Around 2005, when the international natural gas market shifted from the buyer's market to the seller's market, international gas prices began to rise rapidly. “CNOOC and Sinopec both hope to sign a gas purchase agreement with international sellers, but some domestic experts advocate that the oil-centric enterprises monopolize the market to create high prices, causing these central enterprises to dare to rush to purchase, lose the opportunity, and watch the international gas price from 7 US$/100. Million British thermal units climbed to 18 US dollars / million British thermal units." The above-mentioned oil officials frankly.

On May 22, Zhou Jiping said frankly that the company’s imported gas had a loss of more than 20 billion yuan in 2013. With the advancement of price reform, especially the adjustment of the price of natural gas, the loss of imported natural gas will further decrease. He told the participating shareholders that the reform of domestic natural gas prices will be put in place before 2015. By that time, the huge loss of natural gas imported by China National Petroleum Corporation will be eased and even completely reversed.

It is reported that according to the “Notice of Natural Gas Price Reform” issued by the National Development and Reform Commission in 2013, domestic natural gas will be divided into two parts, namely, inventory and increment. In 2013, incremental gas will be implemented in accordance with relevant policies, and new gas prices will be implemented. The inventory of the agreement is gradually adjusted in accordance with the principle of "old-fashioned old price."

This means that when Russian natural gas arrived in China in 2018, domestic natural gas prices were all supplied to the society in accordance with the principle of “new gas new price”.

In order to further meet the market's demand for natural gas, PetroChina also worked on unconventional natural gas such as shale gas and coalbed methane. “Preliminary realization of the orderly development of coalbed methane has achieved 860 million cubic meters of commercial gas volume in 2013, and it is planned to achieve 1.2 billion cubic meters of commercial gas volume in 2014.” Zhou Jiping said.

In terms of shale gas, he also stated that he has made important progress in Sichuan, Chongqing, and Yunnan. The most important thing for shale gas development is cost. The company plans to continuously reduce costs through technological and management model innovations and achieve commercial development requirements. The company is actively introducing foreign technology, and has continued to autonomy, making greater progress. Sinopec has made great achievements. The company is also communicating and discussing with Sinopec.