In recent years, the energy partnership has played a crucial role in Sino-Russian trade and economic cooperation. The partnership between China and Russia in the oil and gas industry is one of the most significant developments in the global energy market. This collaboration has been expanding over the last several years and has seen China become one of the largest buyers of Russian oil and gas. Interaction in the energy sector has always been the most significant, most beneficial, and most wide-ranging area of practical cooperation between the two states, and it has a solid foundation. The 1996 “Russia-China Joint Statement” laid the basis for China-Russia cooperation in the energy sector, and the field has gradually expanded from oil and gas to coal and nuclear power.
Russia is currently China’s largest source of energy imports and the second largest source of crude oil imports. Gazprom announced that in 2023, Gazprom’s daily natural gas exports to China via the Power of Siberia pipeline will set a new historical record. Since January 1, the company’s daily export volume has reached and exceeded the level required by the 2023 agreement. In addition to its economic benefits, the cooperation between China and Russia in the oil and gas industry has significant political implications, especially in the face of Western sanctions. It symbolizes the strengthening ties between the two countries and their commitment to working together for their mutual benefit. In fact, the partnership has been so successful that other states are looking to replicate this model of cooperation.
Many experts have noted the expansion of energy cooperation between Moscow and Beijing. According to statistics released by the General Administration of Customs of China on January 20, 2023, Russia increased exports of liquefied natural gas (LNG) to China in 2022 by 43.9% to 6.5 million tons, oil – by 8.3% to 86.25 million tons. As a result, energy trade between Russia and China has grown by 64% in monetary terms and 10% in physical terms since the beginning of 2022.
“Energy cooperation between China and Russia is the cornerstone of practical interaction between the two countries and also serves as an effective force in protecting global energy security,” Xi Jinping stressed in his message.
Oil industry
The oil industry is the top priority of Sino-Russian energy cooperation. Rosneft CEO Igor Sechin noted that Russian oil exports to China in January-October 2022 increased by 9.5% year-on-year to almost 72 million tons, the company said. This is equivalent to about 1.7 million barrels per day. In addition, to meet growing demand in Asia, the company is developing the major Vostok oil project, where it intends to reach a production of 115 million tons per year, or about 2.3 million barrels per day, by 2033. The project will transport oil along the Northern Sea Route through Russia’s Arctic waters, reducing delivery time and costs.
Besides this oil project, CNPC and the Russian company Rosneft Oil signed an additional agreement on the purchase and sale of crude oil. According to the agreement, Russia will continue to supply 100 million tons of crude oil to China through the territory of Kazakhstan for 10 years. Meanwhile, as of January, CNPC imported over 300 million tons of crude oil and over 15 cubic meters of natural gas from Russia through the pipeline.
This partnership has also extended to the petrochemical sector. In 2019, Russia’s Rosneft and China National Chemical Corporation (ChemChina) agreed to expand their cooperation, which has allowed both countries to further diversify their energy sources. This diversification is an important strategy for both states to reduce their reliance on other countries for their energy needs.
“Oil and gas cooperation is the biggest area of cooperation between China and Russia because of the huge complementarity between the two countries in the energy sector,” said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
Gas deals
The gas sphere is one of the most promising areas for expanding Sino-Russian energy cooperation. The pipeline is a major strategic project contributing to the Sino-Russian energy partnership, which has been agreed upon and emphasized by the heads of both countries. According to statistics, pipeline gas supplies from Russia to China in January-November 2022 increased 177 percent in value terms over the same period last year. Russia already supplies gas to China via the Power of Siberia pipeline, which began deliveries in 2019, as well as LNG. The Russian deputy prime minister emphasized that, despite the current challenges, changes in the foreign market do not affect cooperation between Russia and China and are “moving forward in all directions” in the energy sphere.
The recent announcement by Russian energy company Gazprom, that they have signed a new long-term contract to supply natural gas to China, is a testament to the strong relationship between the two countries. The deal, worth $400 billion, will provide China with 38 billion cubic meters of natural gas per year for the next 30 years. This is a significant development that underlines the success of the partnership.
In addition, China National Petroleum Corporation (CNPC) and Russia’s Gazprom signed an agreement to buy and sell gas from Russia’s Far East, another important result of cooperation in gas trade. The Yangtze River Underwater Crossing Project of the China-Russia Eastern Gas Pipeline, a key project in the southern section of the China-Russia Eastern Gas Pipeline, is also in full swing. With a total length of 10,226 kilometers, it is the longest tunnel through the Yangtze River under construction.
Nowadays, relatively small volumes of LNG are exported from Russia to China, but in the future, the volume of LNG supplies may become comparable with deliveries through pipeline projects. By the way, the supply of liquefied natural gas increased by 39% in volume and 150% in value, while the supply of oil increased by 10% and 50%, respectively. Sechin noted that in the future, LNG supplies to China may be at a level comparable to pipeline supplies. Russia and China are planning to jointly develop and produce equipment for the energy sector. Moscow also counts on the participation of Chinese partners in the construction of a liquefied natural gas plant in the Ust-Luga district of the Leningrad region.
For investment in the oil and gas sector, the two countries are mutually involved. China has increased its investment in Russian energy projects since 2014, when Russian companies’ access to Western financing was limited because of sanctions. Chinese companies already hold stakes in Russian projects, including Novatek’s Yamal LNG and Arctic LNG 2. Meanwhile, Russia has invested $55 billion in a pipeline deal with China, with only $3.81 billion in natural gas imports through the pipeline since December 2019, according to Chinese customs data.
Despite the challenges of distance and fluctuating prices, the cooperation between China and Russia is expected to continue to grow in the coming years. Both countries are actively seeking to strengthen their economic and political ties, switch to payment in yuan and rubles, and this partnership will play a significant role in achieving that goal. Moscow and Beijing share a common position on the prospect of developing renewable energy sources, introducing green, low-carbon and sustainable development, and expanding energy cooperation on a larger, deeper scale.
In conclusion, the cooperation between China and Russia in the oil and gas industry is a significant development in the energy market. The partnership has provided benefits to both countries and has become an example of successful international cooperation. The cooperation between Moscow and Beijing in energy is a vital step towards a more sustainable and secure global energy landscape.
Energy cooperation has always been the weightiest, most successful and broadest area of practical cooperation between states has a solid foundation for continuously expanding new cooperation. In recent years, energy collaboration Sino-Russian has been expanding, and several oil and gas pipeline projects between the two countries have been put into operation from one to the other. And this connection will only expand in the future as China’s demand for Russian oil and gas continues, and both sides can explore further cooperation in renewable energy and other areas.
Tatiana Bokova, Intern of the Russian National Committee on BRICS Research – special for InfoBRICS