Nikola Mikovic

Opinion | Russia needs China’s market more than China needs Russian gas

Despite increased Russian oil and gas imports, China’s climate goals and supposed push for lower rates complicate plans for another pipeline

Reading Time:3 minutes

Why you can trust SCMP

Technicians check equipment at the Fuling shale gas field in Chongqing, on September 21, 2023. Experts say China’s natural gas imports will amount to 250 billion cubic metres by 2030, which can mostly be covered by existing contracts. Photo: Xinhua

Nikola Mikovic

Published: 8:30pm, 30 Jul 2024

Despite its ambitious plans to become carbon neutral and energy self-sufficient by 2060, China remains dependent on the import of fossil fuels. But China - unlike the European Union, which has begun an “energy divorce” from Russia since the invasion of Ukraine - can still rely on inexpensive Russian natural gas and oil.

Cut off from Western markets, Russia – whose oil and gas income accounts for nearly 30 per cent of its national budget – desperately aims to find new customers for its energy. Over the past two years, Russia has significantly increased its oil exports to India. Now it seeks to build the Power of Siberia 2 pipeline that would allow for the supply of 50 billion cubic metres of natural gas per year to China.

In 2023, Russia became China’s top source of crude oil imports. Russian exports of natural gas to China increased by 61.7 per cent compared to 2022. However, China appears not to be in a hurry over the Power of Siberia 2 pipeline. One of the main reasons for this delay could be concerns over price.

It is no secret that China is taking advantage of Russia’s “energy decoupling” from Europe to get better prices for Russian gas. The European Union has found ways to significantly reduce its gas imports from Russia. However, energy cooperation with China has not allowed Russia to fully make up for the loss of the European market.

In 2023, Russia exported only 28.3 billion cubic metres of natural gas to Europe, which is a drop in the ocean compared to the 192 billion cubic metres that Gazprom alone sold to European countries in 2019.

In 2023, China bought 22.7 billion cubic metres of Russian natural gas, and was paying US$286.9 for 1,000 cubic metres of gas. The Kremlin charged much more for European countries, selling natural gas at US$461.3 for 1,000 cubic metres.