China, Russia ink long-awaited gas deal

Chinese President Xi Jinping (2nd R) and Russian President Vladimir Putin (2nd L) attend the signing of the China and Russia Purchase and Sales Contract on East Route Gas Project and a memorandum in Shanghai, May 21, 2014. (Xinhua/Pang Xinglei)

China and Russia on Wednesday signed a long-awaited gas deal in Shanghai, ending a decade of natural gas supply talks between the two neighbors.

The 30-year deal came one day after visiting Russian President Vladimir Putin said that "significant progress" had been made over price.

Two documents, China and Russia Purchase and Sales Contract on East Route Gas Project and a memorandum, were signed at a ceremony attended by President Xi Jinping and Putin.

The talks have repeatedly stalled over price. The agreed price in the latest deal is not known.

According to a news bulletin on the website of China National Petroleum Corporation (CNPC), the contract will see the east route pipeline start providing China with 38 billion cubic meters of natural gas annually from 2018.

In 2013, CNPC signed a framework gas supply agreement with Russia's Gazprom, the world's largest gas company, but the divergence in pricing left the purchase and sales contract unsettled until Wednesday.

"The deal...fully embodies the principle of mutual trust and the mutual benefit of China and Russia," said the bulletin.

The agreement will accelerate economic and social development in Russia's far east region. The gas will come from the Kovyktin and Chayandin gas fields in eastern Siberia of Russia and will be piped to China's northeast, the Beijing-Tianjin-Hebei metropolitan area in the north and the Yangtze river delta in the east.

China and Russia have vowed to strengthen cooperation in energy and infrastructure in Russia. According to a joint statement signed by the two leaders after their talks on Tuesday, they will "establish a comprehensive energy cooperation partnership".

CNPC chairman Zhou Jiping, and Wu Xinxiong, head of China's National Energy Administration and deputy head of the National Development and Reform Commission, China's top economic planner, signed the latest deal on the China's behalf.

Li Zhonghai, a researcher with Chinese Academy of Social Sciences, said that the final natural gas deal enhanced energy cooperation and improved the bilateral relationship.

"The deal is a milestone," said Liu Yijun, professor with China University of Petroleum: "The east route pipeline explored natural gas import channels and guarantees energy security."

"The contract reflects the final compromises from the two country's enterprises, especially in the pricing method," Liu explained.

Feng Yujun, an expert on Russia, said that the deal helped Russia realize simultaneous gas supplies to Asian-Pacific and Europe, which will balance the natural gas market in Eurasia.

Importing 38 billion cubic meters will satisfy China's demand for clean energy to tackle air pollution and pursue sustainable development. According to the CNPC, natural gas consumption stood at 167.6 billion cubic meters in 2013, up 13.9 percent year on year, and the annual growth rate was estimated to be 10 percent in the next few years.

The deal will boost the construction of China's pipeline network, as well as fueling the economic growth and increasing job opportunities along the pipelines, Liu added.