PetroChina invests 20 billion U.S. dollars to build pipelines

Sino-Russian 400 billion US dollars of natural gas big orders have been settled. Before this, China and Russia have been negotiating for nearly 20 years, but they have been unable to reach an agreement because of their psychological price gap. Now, relations between Russia and Ukraine and Europe With a tense opportunity, this major energy deal was finally achieved. This is naturally a win-win cooperation. Since the specific negotiation prices and payment settlement methods of the two sides are still not known to the outside world, this has increased the curiosity and speculation of the outside world. What are the different considerations behind this paper agreement? How does the introduction of Russian natural gas affect China's energy structure? What does it mean for the reform of natural gas prices that are brewing? We hope to describe a clearer outline.

On May 21, under the joint witness of President Xi Jinping and Russian President Vladimir Putin, PetroChina

Zhou Jiping, chairman of the group company, and Miller, president of Gazprom, signed the “China-Russia East-line Pipeline Gas Supply and Sale Contract”.

The negotiations in the past two decades have finally come to an end. In the future, Russian natural gas will be piped from Xinjiang and Heilongjiang provinces to the hinterland of China.

The "China Business News" reporter was informed that the investment in pipeline construction in China will reach 20 billion US dollars. At present, Xinjiang and Heilongjiang have started internal negotiations with PetroChina, including the purchase and ownership of imported natural gas in the future.

Domestic provinces begin negotiations

In the northeastern border of China, Heihe City, Heilongjiang Province, bordering Russia, has become the focus of attention after the Sino-Russian gas agreement. On the eastern side of the Heihe Development Zone, the starting point of the Chinese section of the Sino-Russian gas pipeline is built here. Across the river from here is the Russian pipeline end point in Belorsk.

“The location of the Heihe section has been completed many years ago.” Heihe Development Zone people told reporters. In recent years, Liu Gang, secretary of the Municipal Party Committee of Heihe City, told reporters many times during the two sessions of the National People's Congress that Heihe has the advantage of introducing energy from Russia, and Heihe's enterprises are also operating other energy pipelines.

After the signing of the Sino-Russian natural gas contract, a person who applied for an industrial construction project in Heihe told reporters that Heihe could win the project and drive the local economy very much.

Another major feature of the Heihe Development Zone is that the industrial electricity used here comes from Russia. It was introduced by the Heihe government and private enterprises many years ago. The Russian electricity price is 50% lower than that of China.

According to the information disclosed by CNPC to the reporters, according to the contract signed by China and Russia, from 2018, Russia began to supply gas to China through the east line of the Sino-Russian gas pipeline. The gas transmission volume has increased year by year, eventually reaching 38 billion cubic meters per year. The contract period is 30 years.

According to the contract, the main source of gas is the Kovik gold field in Irkutsk region of Russia and the Chayang gold field in the Republic of Sakha. The Gazprom is responsible for gas field development, natural gas processing plant and pipelines in Russia. Construction. PetroChina is responsible for the construction of supporting facilities such as gas pipelines and gas storage in China.

In China, the macro direction of the pipeline is Heihe-Beijing-Shanghai, and the proposed new pipeline is about 3,060 kilometers. The entry point is located about 10 kilometers north of the Heihe Development Zone, with a new pipeline diameter of 1016~1420 mm; and 5 underground gas storages.

“As early as last year, we have already discussed the matter after China and Russia signed a natural gas contract.” Heilongjiang provincial government officials told reporters, “We hope to get more natural gas resources because our industry needs natural gas.” People also revealed that "we are still negotiating with PetroChina, and more natural gas can help Heilongjiang develop industry and save energy and reduce emissions."

An insider of PetroChina confirmed to reporters, "Now, we are negotiating with Heilongjiang and Xinjiang." The specific content of the negotiations was not disclosed.

Earlier, PetroChina said that Sino-Russian gas cooperation will accelerate economic and social development and oil and gas resources development in the Russian Far East and diversify exports. Russia's target market for imported natural gas is mainly in Northeast China, Beijing-Tianjin-Hebei and Yangtze River Delta regions, meeting China's domestic energy consumption growth, improving the atmospheric environment, optimizing energy consumption structure, promoting energy import diversification and other needs, and driving the development of related industries along the line.

The reporter learned that the construction of large-scale natural gas pipelines in the West-East Gas Pipeline and Sichuan-to-East Gas Pipeline will encounter the situation of provinces competing for natural gas along the way.

New growth point in Heilongjiang

Another route for the Sino-Russian gas pipeline is Daqing, China's most traditional oil city.

However, since 2014, the status of Daqing has begun to violently shake.

This year's national first quarter GDP growth rate was 7.4%, while Heilongjiang's first quarter growth rate was only 2.9%, the bottom of the country. "For this matter, Governor Lu Hao has already held many meetings, and we have tried our best to make the article on Russian energy." Heilongjiang government officials told reporters.

The main reason is that the growth rate of Heilongjiang energy industry showed a negative growth of 2.2% for the first time. The decline in the performance of Daqing Oilfield is regarded as one of the reasons for the poor economic data of Heilongjiang in the first quarter.

According to the data, in the first quarter, the added value of Daqing Oilfield decreased by 5.585 billion yuan, and the growth rate decreased by 0.8 percentage points. Daqing Oilfield accounts for 50% of Heilongjiang's industrial enterprises above designated size.

"Heilongjiang has encountered some problems. In the future, we will promote the implementation of the Northeast Regional Planning and ensure the development of the foreign economy." Fan Hengshan, deputy secretary general of the National Development and Reform Commission, told reporters.

Daqing Mayor Xia Lihua told reporters that the proportion of non-energy industry in Daqing has reached 57%.

Heilongjiang is also eager to find new power outside of Daqing.

The reporter learned from people familiar with the matter that Heilongjiang has already planned a number of new energy development zones. In the three new energy industrial zones known to reporters, most of them rely on Russian energy construction, including relying on Sino-Russian pipeline natural gas. Industrial area.

Zhou Jiping, chairman of PetroChina, said that after nearly 20 years of signing the Sino-Russian gas cooperation agreement, the government, enterprises and experts and scholars have devoted a lot of efforts. The economies of China and Russia are highly complementary, and mutual benefit and win-win is the basis for strategic oil and gas cooperation. PetroChina will work with Gazprom to implement relevant work in accordance with the signed documents and agreements to ensure the successful implementation of the project.

It is understood that the Sino-Russian natural gas agreement has opened the way for the two countries to cooperate in the export of Siberian natural gas to China. Russia will invest 55 billion US dollars for exploration and construction of energy pipelines for China. According to the agreement, China will invest 20 billion US dollars for infrastructure and natural gas development. The natural gas pricing is similar to the pricing method for Europe - related to the market price of oil and oil.

PetroChina has planned the pipeline ahead of time.

In fact, as early as three years before the successful Sino-Russian natural gas contract negotiations, PetroChina had already started the pipeline construction plan, but due to the large investment in pipeline construction, it eventually reached 20 billion US dollars, so participants were embarrassed.

In 2011, PetroChina began to plan a natural gas pipeline starting from Qinhuangdao, passing through Dalian, Shenyang, Changchun and Harbin.

However, the area through which the natural gas pipeline passes is different from the previous pipeline. “Conventionally, the route of the natural gas pipeline should be a region lacking natural gas. However, there are many natural gas producing areas including Daqing Oilfield. “The industry expert said, “This pipeline may have more important significance.”

The reporter learned from CNPC that this pipeline has the idea of ​​introducing Russian natural gas.

As early as 2006, China and Russia signed the Memorandum of Understanding on the supply of natural gas from Russia to China for the first time, confirming the construction of two natural gas pipelines to China, namely the east and west lines. However, China and Russia have conducted negotiations on several occasions and have not reached a consensus on the price issue. Therefore, the pipeline construction was once put on hold. At that time, there was still a huge price difference between China and Russia - $100/m3.

However, PetroChina can't wait any longer. "Now, this pipeline will be built in a single section, and it is likely to expand in the future." PetroChina people introduced the planned natural gas pipeline.

Building a natural gas pipeline running through the Northeast, the investment is huge. The reporter asked the oil industry insiders to calculate that only 100 million yuan of investment in the pipeline, the necessary base station construction in the middle, but also requires huge investment.

"We have had such an idea to build a pipeline with local enterprises." PetroChina told reporters. The reporter learned that PetroChina has found the SASACs in Liaoning, Jilin and Heilongjiang Provinces, and hopes to cooperate with investment companies under the jurisdiction of the provincial SASAC [microblogging].

A number of investment companies have received “invitation” from PetroChina, but everyone’s interest is not high. “Liaoning has had experience in building pipelines with PetroChina. We feel that the risks are too high and the benefits are not high.” A person involved in the matter The reporter revealed. The attitude of Liaoning has a great impact on the other two provinces. "When everyone talks about this matter, they only think that the return on investment is not very interesting."

According to the reporter's understanding, PetroChina's usual mode of cooperation is to maintain an absolute controlling stake in the operation of the pipeline network. The joint venture parties involved in the cooperation are usually arranged by the local government, and they are downstream enterprises that need to purchase natural gas.

According to a person from PetroChina, “the annual huge profits of oil and petrochemical enterprises are mostly used in the construction of pipelines and other infrastructure. From the financial point of view, we can be wholly-owned or wholly-owned.” The source revealed that the local joint venture construction In the pipeline, it is generally the local government that actively participates in the acquisition of more natural gas.

Now that three years have passed, CNPC people have told reporters that if the local government does not participate, PetroChina will lend itself.

The dual role of politics and price

Zhou Jiping, chairman of PetroChina, said that after nearly 20 years of signing the Sino-Russian gas cooperation agreement, the government, enterprises and experts and scholars have devoted a lot of efforts.

In fact, in 1999, China and Russia reached an intentional gas export agreement. After more than a decade, the price issue has been a check and balance factor for Sino-Russian gas negotiations.

In June 2009, the Chinese and Russian governments signed the Memorandum of Understanding on Sino-Russian Cooperation in the Field of Natural Gas. In October 2009, PetroChina and Russia signed the "Russia Agreement on Exporting Natural Gas to China." In March 2013, PetroChina and Russia signed the Memorandum on Natural Gas Cooperation between China and Russia. In September 2013, PetroChina and Russia signed the “Framework Agreement on Sino-Russian Eastern Gas Purchase and Sale”.

Almost every meeting of national leaders talked about natural gas cooperation. In September 2013, President Xi Jinping visited Russia, and Sino-Russian natural gas cooperation showed substantial progress. The two sides signed an agreement on technical issues such as pricing principles and price formulas. Until Russia became involved in the Ukrainian issue and Russia became passive, Putin visited China. On May 21, 2014, PetroChina and Russia signed the "China-Russia East Line Natural Gas Purchase and Sale Contract."

The reason why the 20-year negotiations can make progress in the short term, Platts energy analyst Vandana Hari believes: Mainly for political reasons.

"Because of the changes in the political situation, Europe may now have a little bit of inattention to Russia. Therefore, Russia is increasingly developing eastward and seeking cooperation in the east. Under such circumstances, China should now occupy a slightly superior position. This is why it is finally a little bit after ten years."

At present, China and Russia have not announced the price of natural gas. The price negotiation is also the highest secret. However, the report obtained by Platts shows that the price range sold to China is in the range of 350-380 US dollars per thousand cubic meters.

At the same time, there has been a big dispute between Russia and Ukraine about the price of natural gas. Ukraine insists on buying it at $268/m3, and Russia insists on selling it at $485. The two sides are also arguing.

In addition, China is able to make up for Russia's funding problems in upstream mining and pipeline construction. "This is also a huge boost for Russia." The above person said.