WSJ: New Russia-China Deal Could Further Hit Natural-Gas Prices

A preliminary natural-gas deal between Russia and China signed over the weekend paves the way for opening up a second major supply conduit between the two countries—and lowering natural-gas prices in Asia.

The deal comes six months after the two countries signed a landmark $400 billion gas deal and will intensify competition among billion-dollar natural-gas projects aimed at Asian markets.

Alexei Miller , chief executive of Russia’s monopoly exporter OAO Gazprom , and Zhou Jiping , chairman of China National Petroleum Corp., signed a framework agreement in Beijing on Sunday for supplying natural gas through pipelines into western China, Gazprom said.

In May, Moscow agreed to supply Beijing with 38 billion cubic meters of natural gas annually for 30 years through pipelines into eastern China from fields in eastern Russia.

“Given weaker oil prices and rubles, we believe China can extract even better terms on this second deal versus the first,” said Gordon Kwan, head of commodity research at Nomura Holdings .

He estimated the value of the second deal, for the supply of 30 billion cubic meters a year, at $284 billion. “The two Siberian gas deals all together could account for almost 17% of China’s total gas consumption by 2020,” Mr. Kwan said. MORE