MOSCOW, May 31 (Reuters) - Russia said on Tuesday it would finalise a major gas supply deal with China in time for a visit in mid-June by President Hu Jintao, wrapping up years of talks to open a new export route to the world's biggest energy market.
Deputy Prime Minister Igor Sechin said he had reached broad agreement at a meeting in Moscow with his counterpart Wang Qishan to supply China with 68 billion cubic metres (bcm) a year of gas over a timespan of 30 years.
Gas export monopoly Gazprom would deliver 30 bcm a year through the ‘Altai’ route, pumping gas from its existing fields in western Siberia across the narrow stretch of common border located between Kazakhstan and Mongolia.
A further 38 bcm per year would go by pipeline down Russia’s Pacific seaboard and into northeast China.
The viability of this route had been in doubt until recently.
The launch of gas exports to China would break Russia’s export dependency on the European market, to which the world’s largest gas producer expects to export over 150 bcm this year.
Sechin said final agreement had not yet been reached on price but the two sides had tasked their state energy firms, Gazprom and CNPC with finalising terms.
"We have asked Gazprom and CNPC to finish talks and prepare a package of contracts for signing before June 10," Sechin told reporters in Moscow.
"We are one big step away from achieving our aims," Liu Tienan, head of China’s state energy directorate, told a separate news conference. "We have created the conditions for the final step."
Officials want a deal to be finalised before a visit to Russia by President Hu, who will be the guest of honour at the St Petersburg International Economic Forum on June 16-18.
Separately, Russian officials said a dispute over payments for Russian oil exports to China had been resolved, after China had paid nearly $200 million in outstanding arrears to state controlled oil major Rosneft and pipeline monopoly Transneft.
START DATE
Neither side gave any dates for the start of gas deliveries, but the ‘Altai’ route is likely to start first as it would tap into Gazprom’s core resource base of fields in western Siberia that are already in production.
The Pacific route, by contrast, would rely on developing new gas assets, such as the Chayandinskoye field, in remote eastern Siberia that are years away from exploitation.
Start dates have often slipped since the two sides signed a memorandum of understanding in 2006, with a joint document inked in October 2009 stating that deliveries would start in 2014-15.
Sechin, who has a sweeping energy policy mandate, has come under pressure to deliver a gas deal after the collapse of a strategic partnership between Rosneft and BP that he masterminded.
Price terms, a key sticking point given Gazprom’s push to benchmark the price China pays off its European export prices, have yet to be finalised, officials said.
No Chinese loan is foreseen as part of the gas export supply deal, and Gazprom’s deputy CEO Alexander Medvedev said the company would have no problems financing pipeline construction.
That contrasts with an oil export deal Sechin negotiated under which Rosneft received a $15 billion oil-backed loan and Transneft a $10 billion credit.
Russia has also lagged behind the gas-rich states of former Soviet Central Asia, which have already started exports to China. Last month, China lent Turkmenistan’s state gas firm $4.1 billion, backed by gas supplies.
Sechin dismissed suggestions that the Central Asians had secured a first-mover advantage. "I think Gazprom is fully competitive in this context," he told reporters.
