OAO Gazprom, the world's biggest natural gas producer based in Moscow, said it is in talks with China's largest oil and gas producer to export gas to China through a cross-border pipeline.

Of two possible routes, Gazprom and China National Petroleum Corp (CNPC) are under discussion over "which has the priority," Alexander Medvedev, deputy chief executive officer of Gazprom told reporters at a Beijing press conference Wednesday.

The finally recommended line may run through northeastern China's Heilongjiang Province or the Xinjiang Uygur Autonomous Region in the west, Medvedev said. Each has an annual capacity of as much as 30 billion cubic metres (bcm) a year.

"We are discussing figures of between 20 bcm and 30 bcm for each project," said Medvedev.

Sources said the western route is expected to link with China's internal west-east Gas Pipeline, which will transport 12 billion cubic metres of natural gas from the Tarim Basin in Xinjiang to Shanghai, some 4,000 kilometres away.

The two lines are being "carefully analysed on both sides," Medvedev Wednesday told reporters.

A CNPC official, who declined to be identified, Wednesday told China Daily the two companies are "in close contact" over the issue, but declined further comment.

Wang Jianing, representative office advisor of OAO Gazprom Beijing, Wednesday told China Daily the negotiation is still at the preliminary stage, and has not gone far enough to touch upon the pricing system for the gas exports.

Pipelines within Russia will be built by Gazprom, while those in China would be financed by its Chinese partner CNPC, Medvedev said at the conference.

But Gazprom will be interested in investing in China's pipeline infrastructure if Beijing backed the move, he said.

Seeing the soaring demand for energy in Asia, the state-controlled gas supplier in Russia is exploring new markets to secure its gas export growth forecast of 6.4 per cent this year, Medvedev told reporters Wednesday on the sidelines of the Beijing press conference.

Gazprom, the supplier of a quarter of Europe's gas needs, expects gas exports to rise to 149.5 bcm this year, excluding shipments to ex-Soviet republics, worth as much as US$27 billion. The export volume is expected to reach 155 bcm next year, Medvedev added.

Gazprom officials said the company has not determined which gas fields to use to pump gas to China.

But Medvedev said Russian gas fields in the eastern Siberia area currently have the potential to export around 65-75 bcm to Asia-Pacific markets.

The Russian firm is also in talks with China's third-largest oil and gas producer, China National Offshore Oil Corp (CNOOC), about supplying liquefied natural gas (LNG) to its LNG terminals, said Medvedev.

Currently most of Gazprom's LNG supplies go to the United States.

The Gazprom senior official also showed keen interest in a partnership with PetroChina and Sinopec in any potential LNG project.

China, the world's second-largest energy consumer after the United States, is vigorously pushing the consumption of cleaner-burning natural gas in a move to cut its heavy reliance on coal and oil. Natural gas is set to account for 8 per cent to 10 per cent of China's total energy consumption by 2020 from the current level of less than 3 per cent.

But China has not yet secured sufficient domestic natural gas reserves.

Industry analysts predict the country is estimated to fall short of natural gas needs by some 80 billion cubic metres by 2020

To meet the demand, China is considering buying pipeline gas from neighbouring countries and regions, such as Russia and Central Asia, and importing liquefied natural gas into coastal areas.

The country's oil majors have massive plans to build LNG terminals along coastal regions in the east to meet the surging demand.

Besides Russia, China and Kazakhstan are also studying the possibility of building a pipeline to deliver natural gas from western Kazakhstan to the Xinjiang Uygur Autonomous Region on China's western border.

Han Xuegong, a senior analyst with CNPC, said each line has its strength, but the close business relations between CNPC and Kazakhstan oil companies may mean the Sino-Kazakhstan route is more feasible.

Source: China Daily