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Putin Inaugurates Siberian Natural Gas Field As Russia Targets Chinese Market

Russian President Vladimir Putin on Wednesday has inaugurated the Kovykta natural gas field in eastern Siberia, located strategically to allow Russia to increase gas exports to China amid growing tensions between Moscow and the West. The inauguration is the culmination of efforts that began about a decade ago to develop new fields and build the Power of Siberia pipeline to deliver to the rapidly expanding market.

We are launching the unique Kovykta gas field, the largest in eastern Siberia. Its recoverable reserves are 1.8 trillion cubic meters of gas,” Putin said via video link during a televised ceremony.

Currently, Russia lacks pipelines to transport gas from its Western Siberian and Arctic gas fields that serve China and Europe. The first Power of Siberia pipeline began to deliver gas from eastern Siberia to China at the end of 2019. It won’t be the last. Moscow has laid out plans to build a Power of Siberia 2 pipeline as Russia increasingly turns to the Middle Kingdom in the face of heavy western sanctions. China and India have become some of the biggest buyers of Russian oil and gas, with Bloomberg’s oil strategist Julian Lee revealing that Russia’s flagship Urals crude oil has been trading at a massive discount of more than per barrel $30, or about 40% to the international Brent crude oil, at the end of last week. In contrast, a year ago, Urals traded at a much smaller discount of $2.85 to Brent. Urals is the main blend exported by Russia. The result: Moscow is beginning to feel the heat of its war in Ukraine, and could be losing ~$4 billion a month in energy revenues, as per Bloomberg’s calculations.

Supplies of Russian pipeline gas--the bulk of Europe’s gas imports before the Ukraine war--are down to a trickle and might be further impacted after a gas pipeline in central Russia that brings gas from Russia’s Arctic through Ukraine to Europe was shut down on Tuesday following a deadly blast. Built in the 1980s, the pipeline enters Ukraine via the Sudzha metering point and currently is the main route for Russian gas to reach Europe.

By Alex Kimani for Oilprice.com

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  • Mamdouh Salameh on December 21 2022 said:
    This consolidates Russia’s status as the world’s superpower of energy. The newly inaugurated Kovykta gasfield alone has recoverable reserves of 1.8 trillion cubic metres (tcm) which will allow Russia to raise further its considerable gas exports to China. In fact, Russia’s Arctic region contains enough gas and oil reserves to support Russian oil and gas exports for more than a century if not longer.

    China has now emerged as the biggest market for Russian oil, gas and coal. During the first 11 months of 2022, China alone bought $69 bn of Russian energy products equivalent to 69% of total EU purchases in 2022.

    China will benefit further from the building of Spirit of Siberia 2 which will carry gas produced in the Kovykta gasfield and also from the use of the Northern Sea Route (NSR) which will cut shipping time by half and is projected to achieve a transportation target of 80 million tons of crude oil cargo by 2024 (equivalent to 1.6 million barrels a day (mbd) of crude oil) heading to China.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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