Russia-China pipeline opens early, gas to reach into Yangtze River

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A joint Russian-Chinese project will now enable Russian gas to reach the Chinese Yangtze River Delta after a new 750km-long section linking Taian, Shandong and Taixing, Jiangsu of the two countries' natural gas pipeline became operational on Wednesday, a whopping six months before schedule, state media reported.

The new section is part of the China-Russia east route natural gas pipeline entitled the West-East Gas Pipeline, connecting the Xinjian region with Shanghai.

According to Chinese media and Beijing's PipeChina, formally known as China Oil and Gas Pipeline Network, the section will help increase the flow of gas into the Yangtze River Delta, a key region for China's vast industrial sector, as it suffers from supply bottlenecks.

"The capacity of allocating resources and ensuring mutual supply in the eastern coastal areas will be further improved, which is of great significance for guaranteeing gas-supply security during peak times and for promoting economic and social development along the pipeline," the company said on the Chinese social media app WeChat on Wednesday.

The sharp hike in gas supply to the delta will see the region's capacity increase to about 50 million cubic meters per day and reduce its dependence on imported liquefied natural gas. The previous capacity was 30 million cubic meters, Chinese media reported. 

The China-Russia east-route natural gas pipeline became partially operational in December 2019, becoming the third cross-border gas pipeline to China after one from Myanmar and another from Central Asia.

The pipeline consists of the Power of Siberia, a 3,000km segment in Russia's far-east, and a 5,111km Chinese section that starts off in Heihe, a city that lies on the borders between the two countries, and ends in Shanghai.

Chinese broadcaster CCTV said the route is expected to spring into full action before the middle of the decade, which would see China receiving a total of 38 billion cubic meters of Russian gas annually. The project, signed in 2014 between China National Petroleum Corporation and Russia's Gazprom, is estimated to be worth $400 billion over three decades.

The pipeline was completed at a critical time for Russia, as it is under severe Western sanctions as the latter tries to boycott Russian energy resources, among other Russian products, and as Moscow and Beijing reached several agreements facilitating the trade between them.

The two companies had agreed a few months back that they would be settling payments for gas supplies in ruble and yuan, about five months after a Russian deputy foreign minister said Russia and China constructed the entire infrastructure required for the transition to trading in national currencies.

The share of national currencies in Russian-Chinese trade has increased significantly in recent years, according to the diplomat, who added that under the new conditions, the goal of increasing Russian-Chinese trade to $200 billion by 2024 is achievable.

Additionally, as Russia is under mounting pressure, the Kremlin reportedly wants Chinese yuan-denominated debt to help the Russian market recover.

A Bloomberg report highlighted that ruble bonds could likely be back on the market in the second half of September. Meanwhile, the report added, the debut of yuan bonds on the Russian market won't happen until next year.

The Chinese foreign ministry told TASS in March that it did not rule out the possibility of using rubles or yuans in energy commerce with Russia.

When asked if China is ready to use rubles or yuans for Russian energy sources instead of the US dollar, the ministry responded by saying "Market players are free to choose the currency in bilateral settlements," adding that "the use of own national currencies in the process of regular trade and economic cooperation may help avoid currency risks and reduce losses stemming from currency exchange."

According to Beijing, Chinese enterprises want to utilize rubles or yuans in commerce with Russia on an equitable and mutually advantageous basis, taking market developments into consideration. "Naturally, we will use currency of other countries due to various considerations."

From January through October, Chinese imports of Russian gas via pipelines reached $3.1 billion, a three-fold increase year-on-year, according to data released by the Chinese customs.

The same agency also revealed that China imported 32% more Russian gas in the first 10 months of 2022, amounting to 4.9 million tonnes, which are worth some $5.3 billion.