Gazprom, Russia’s state-owned gas conglomerate, is reportedly moving forward with expensive technical design work for the long-delayed Power of Siberia 2 (PS2) pipeline to China.
The move could be a sign that the Kremlin believes the project may finally be regaining momentum despite a lack of public comments from the Chinese side.
Gazprom begins “hundreds of volumes” of engineering studies
After Moscow and Beijing signed a “memorandum of construction” in September, Gazprom engineers reportedly began preparing detailed technical documentation, three people said to be familiar with the work told the Financial Times (FT).
The studies appear to mark the front-end engineering design phase – an extensive process involving “hundreds of volumes” of technical papers, said Sergey Vakulenko, a former strategy chief at Gazprom Neft and now a senior fellow at the Carnegie Endowment.
Such work is costly, according to Vakulenko, who estimated the design phase alone could amount to 5 percent of the total project cost, while a senior Russian energy executive told the FT it could be as high as 10 percent.
“Such spending is unusual, unless there is a strong belief that the money is being well spent and that the investment is safe,” the executive said.
Replacing lost exports to Europe
The new pipeline – intended to deliver 50 billion cubic meters of gas annually – is Russia’s only serious option to offset part of its collapsed gas exports to Europe.
Analysts cited by the FT said the upper end of the total cost could exceed $30 billion, though the final figure may be lower.
The pipeline would stretch 6,700 km (4,163 miles), including 2,700 km (1,678 miles) inside Russia from the depleted Yamal fields, around 1,000 km (621 miles) through Mongolia, and the rest into northern China.
Yet major terms – price, supply conditions and financing – are still unsettled, and China’s silence on the project has raised doubts that Beijing views it as a priority, the FT reported
Gazprom pushes ahead despite no final deal
Despite the uncertainty, Gazprom chief Alexei Miller confirmed that work has begun on a 410 km (255 miles) section in Siberia, which Russia intends to build regardless of China’s decision as part of domestic gas supply improvements.
“Gazprom is building pieces of what may eventually become part of PS2 if it goes ahead, but will serve local markets if it isn’t,” analyst Ronald Smith told the FT.
A Russian energy consultant quoted by the FT said the company’s project divisions “either need to be shut down or given something to work on” amid Gazprom’s plummeting revenue.
The consultant added that Gazprom believes China will eventually agree because it remains “the cheapest gas” available to Beijing.
Cautious approach from Beijing
Russia already supplies China via the original Power of Siberia pipeline, which began operations in 2019. The two sides agreed in 2024 to increase the annual capacity from 38 to 44 billion cubic meters, reducing Beijing’s urgency to approve the far larger PS2.
While Russian media hailed a “historic deal” in September, Kyiv Post was unable to find original Chinese coverage of it at the time, with most outlets instead citing Russian reports.
It also remains unclear how Gazprom plans to fund the massive project. The company recorded its first loss in 25 years in 2023 before returning to profit last year, but its debt – 5.7 trillion rubles ($71 billion) – is more than four times its net earnings.
However, China has begun preparing its bond market to accommodate Russian energy companies. In September, Chinese rating agency CSCI Pengyuan assigned Gazprom and other Russian majors a triple A rating, theoretically opening the door to bond issuance.