China and Russia agreed a huge gas supply contract in Shanghai on Wednesday, after a decade of talks on the multi-billion-dollar deal, Chinese state energy giant CNPC said.
The contract signatures were witnessed by Chinese President Xi Jinping and visiting Russian leader Vladimir Putin, CNPC said in a statement, according to AFP.
"This is another major milestone achievement in China- Russia energy strategic cooperation," it said.
The total value of the contract is $400 billion, Gazprom CEO Aleksey Miller said. However, the price of gas stipulated in the document remains a "commercial secret," according to RT.
Assuming the overall price of the contract includes only the cost of supplies of Russian gas, then the $400 billion price tag means China will pay about $350 per 1,000 cubic meters. Delivery price for the contract will be tied to market oil prices, Putin said from Shanghai on Tuesday.
Infrastructure investment from both sides will be more than $70 billion and will be the world's largest construction project, with Russia providing $55 billion up front and China $22 billion for pipelines on their respective territories.
This is Gazprom's biggest contract to date.
Under the 30-year deal between CNPC and Russia's Gazprom 38 billion cubic meters could eventually be sent annually from Russia to China, the statement said.
The amount is just over half the 70 billion cubic meters envisaged under a 2009 framework agreement between the two.
Russia will supply China the gas via the eastern 'Power of Siberia' pipeline, which crosses Siberia and reaches China's populous northeast regions. A separate route that could deliver gas to China's western provinces and provide diversification is also in the works, according to Putin.
According to Miller, the deal was set to go through at 4:00pm Shanghai time when he understood "all fundamental issues were resolved."
The deal comes as a part of Russia’s larger-scale pivot to Asia and especially China as Western economies threaten sanctions over turmoil in Ukraine. Sanctions by the U.S. and the EU have been mostly limited to visa bans and asset freezes on some of Russia’s top officials, while so far only threatening a so-called third round of real economic sanctions against Russian hydrocarbon businesses.
Last year, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020.
Russia has vast energy reserves and China is constantly seeking resources to power the growth of its economy, but the neighbors had been unable to agree a price for years.
The signing of the gas contract represents a scoop for Putin after the United States and the European Union slapped sanctions against some of his closest allies following Russia's takeover of the Crimea peninsula.
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