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China and Russia Haggle Over Energy Deal Prices

China, the world’s second largest economy, has made no secret of its interest in securing Russian energy exports, while Moscow has done little to hide its interest in supplying it.

Recent discussions and future export projects are increasingly getting mired in discussions over cost, with Beijing seeking long-term fixed price contracts, an arrangement that the Russian Federation’s leading energy companies are most reluctant to agree to.

Several months ago during a visit to the Russian Federation China's President Hu Jintao spoke about bilateral Sino-Russian trade doubling within the next four years from $55 billion in 2010 to $100, to double again to $200 billion by 2020, driven mainly by Russian energy exports to China, including oil, gas, hydro-electricity and coal.

As a non member of the Organization of Oil Exporting countries, the Russian Federation is not constrained by OPEC quotas and is eager to export as much oil and natural gas as possible when prices are high and is balking at China’s insistence on long-term, fixed price contracts, The Japan Times reported.

China has bluntly informed Russia that unless acceptable pricing arrangements for both pipeline oil and natural gas are agreed in advance, the promised energy cooperation will not go ahead as planned.

By. Joao Peixe, Deputy Editor OilPrice.com




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  • Anonymous on September 19 2011 said:
    China may have held out too long. Japan's need for LNG, following the damage to its nuclear facilities from the Sendai earthquake, has pushed Asian spot LNG prices up 50% to $17/MMBtu recently. More bad news: According to the Jakarta Post, Indonesia is pressing China to increase the price it pays for Tangguh LNG.
  • Anonymous on September 20 2011 said:
    An interesting and important comment Robert Price. Now the folks in the cheap seats know why Big Gas called Sarah Palin's proposal for a gas pipeline from Alaska or Northern Canada to Chicago "Politically smart but economically stupid". They want to sell gas in Asia.But don't worry. Japan's interest in extra gas is a short to medium term move.Nuclear is in the books for them.

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