Recent deliveries of gas from Russia’s sanctioned Arctic LNG 2 project to China and the signing of the Power of Siberia 2 pipeline agreement signal a deepening energy partnership between the two nations. This growing relationship has significant implications for global energy markets, particularly as Russia pivots away from its traditional European markets.
China’s Role and the Arctic LNG 2 Project
The recent deliveries of sanctioned Russian gas to China are a notable development. For over a year, cargoes from the Arctic LNG 2 project had struggled to find buyers due to US sanctions. The first successful delivery by the tanker Arctic Mulan to China’s Beihai LNG Terminal appears to have marked a turning point. Since that initial shipment, four additional sanctioned LNG carriers are reportedly en route to China, with more expected.
This apparent shift in Beijing’s willingness to accept the gas could provide a crucial lifeline for the project’s operator, Novatek, even though the plant remains deeply unprofitable and is operating at a fraction of its design capacity. While these deliveries won’t solve the project’s long-term financial problems or its operational challenges—including severe weather and incomplete infrastructure—they do signal China’s growing readiness to openly support Russian energy exports. This move strengthens the narrative of a deepening Russia-China energy axis.
The Power of Siberia 2 Agreement
The new agreement to build the Power of Siberia 2 pipeline further solidifies the long-term energy relationship between Russia and China. This deal, long delayed, confirms a 30-year strategic partnership that could significantly reshape global gas flows. While the agreement lacks specifics on pricing and other key details, its mere existence is a powerful signal.
The pipeline, once built, is expected to have an annual capacity of 50 billion cubic meters (bcm), delivering gas from the Yamal fields that once supplied Europe to China via Mongolia. This, along with an increase in flows via the existing Power of Siberia pipeline, highlights Russia’s determined pivot to Asian markets. The agreement may also upend investment decisions for future LNG export terminals in other regions, particularly the US, as it secures a major buyer for a significant portion of Russia’s gas reserves.
The pipeline deal and the LNG deliveries from Arctic LNG 2 show how Russia is attempting to compensate for lost European markets by cementing its position as a major energy supplier to China.
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Source: Llyod’s List
