The 30-year gas deal between Russia and China will boost gas supplies by 10 billion cubic meters and will be paid in euros.
RT reported that Russia's Gazprom Group and China's National Oil and Gas Group (CNPC) signed a second long-term contract on February 4 on the supply of 10 billion cubic meters of natural gas from Russia's Far East. The deal was signed during Russian President Vladimir Putin's official visit to China.
According to Gazprom, this agreement is "an important step in further strengthening mutually beneficial cooperation between Russia and China in the gas sector". When the project reaches full capacity, the volume of Russian gas supplied to China via the Far East will reach 48 billion cubic meters per year (including supplies via the Power of Siberia pipeline).
According to Reuters' estimate, this gas contract could bring in about 37.5 billion USD within 25 years, if the average gas price is 150 USD/1,000 m3, as the price in the current contract between Russia's Gazprom Gas Group and China.
In addition, Russian oil giant Rosneft, headed by Putin's longtime ally Igor Sechin, has also signed a deal with China's CNPC to supply 100 million tons of oil via Kazakhstan over 10 years, extending the existing deal. Rosneft said the new deal is worth $80 billion.
Gazprom's largest natural gas field in the Far East is the Yuzhno-Kirinskoye field, which will start production in 2023.
The signing of a second contract for Russian gas supplies to China aims to assess mutual trust and the highest partnership between our countries and our companies. Our Chinese partners from the CNPC confirm that Gazprom is a reliable gas supplier, said Gazprom head Alexey Miller.
According to Kremlin aide Yury Ushakov, Russia's energy supply to China has reached a record high.
Gazprom and the CNPC signed their first 30-year contract for gas supplies via the Power of Siberia pipeline in 2014. The 3,000-km-long cross-border pipeline is the first natural gas pipeline between Russia and China, which began delivery three years ago.
In 2015, the parties agreed to supply gas via the Western route, or the Power of Siberia 2, which will supply gas from the Yamal Peninsula of Siberia, which has Russia's largest gas reserves. The new pipeline will be able to transfer an additional 50 billion cubic meters of gas via Mongolia to China annually.
In January, Gazprom completed an analysis of the Power of Siberia 2 gas pipeline construction project.
Analysts say Russia's "turning of the gas axis" to China poses a challenge for Europe, a region that has struggled with skyrocketing energy prices in recent months.
Analysts note that Russia remains Europe's main gas supplier, but should take a serious look at the changes it is making to its energy transport infrastructure.
Europe's annual gas consumption is 541 billion cubic meters, more than China's 331 billion cubic meters, but China's consumption is expected to increase to 526 billion cubic meters by 2030 as the country reduces its dependence on coal.
Consulting firm McKinsey estimates that China's gas demand will double by 2035. The country's annual gas consumption is expected to reach 620 billion cubic meters by 2040 and surpass oil to become the top fuel source by 2050, according to data released by China's energy giant Sinopec in September.
