IBTimes: Should Australia Worry Over Sealed China-Russia Gas Deal?

China and Russia had just sealed a $400 billion gas deal which experts said could put Australian exports of LNG (liquefied natural gas) in peril.

China currently pays $US15 per million British thermal units (BTU) for Australian LNG, according to the Australian Financial Review. Although it still isn't clear just how much China will pay Russia for its gas, analysts at Barclays estimate it could only be at $350 per million standard cubic metres, slightly cheaper than importing through the existing Turkmenistan-China Central Asia pipeline. Moreover, it is 40 per cent cheaper still to the cost of LNG brought in by sea.

The US$400 billion 30-year supply accord between China and Russia will involve a total of 1 trillion cubic metres of gas. Although China is the expected majority recipient of the deal, Russia will still have much cheap gas left for its disposal, of which it actually already plans to sell elsewhere in Asia.

David Ledesma, an independent consultant working in the LNG sector, told Bloomberg that the agreement will not only impact the volume of LNG that China needs to import, but most importantly, it will create an "impact on the level of the spot price for LNG in Asia." MORE