The Power of Siberia is a loss-making project. The Power of Siberia gas pipeline is the most ambitious project of our time

Oil and gas analyst, partner of the RusEnergy consulting agency Mikhail Krutikhin explained why he considers the construction of the Power of Siberia gas pipeline inappropriate, and why Vladimir Putin is interested in this project.

Construction of the Power of Siberia has begun, but is subject to major delays. It is recognized that in 2018 there will be no gas on the border with China. Now they say that deliveries will begin no earlier than 2021. But this also raises doubts. The development of the Chayandinskoye field is progressing with a large lag. And there we still need to build a gas processing plant in the Amur region. So Power of Siberia has dubious prospects. The price of gas according to the agreed upon formula is less than the cost of its production and transportation.

- Are the Chinese skeptical?

The Chinese are calm. They refused to finance this project. At the very beginning, when they were talking about signing the contract, Russia announced that China would give $25 billion for the construction of the pipeline, but the Chinese said that they would not do anything like that.

- How will the contract be affected by the fall in oil prices?

The cost of gas will change. And Russia will have to beg China to change the terms of the contract. The Chinese are very difficult negotiators. It turns out that Russia will subsidize Chinese consumers with its gas, since it will sell it to them below cost. This is not commerce.

- Is this contract even necessary?

China is reducing its gas balance without Russian gas. It has enough gas from Central Asia, liquefied natural gas, its own production, gas from Myanmar. From these sources, China covers its gas balance for many years to come. Russia actually imposed this contract on China. Negotiations have been ongoing for many years. Finally, the Chinese were persuaded to call the last agreement in Shanghai a contract, so that the Russian leadership would be pleased. They named it. They began to build a pipe.

The Chayandinskoye field, which will supply gas there at the first stage, will not produce more than 25 billion cubic meters per year. And they signed up for 38 billion cubic meters. This means that it is also necessary to use the Kovyktinskoye field in Irkutsk region. But the horse was not lying there - from there we still need to build 800 km of a gas pipeline for the Chayandinskoye field and develop the field itself. In general, they committed to supplying gas without having any idea how this could be accomplished.

- Why does Russia need this?

Russia absolutely does not need this. This is a huge expense. But this is the political will of the leadership. When I miscalculated economic expediency Gazprom economists were categorically against these projects. These are net losses for Russia, for the budget, for Gazprom. But in October 2012, Russian President Vladimir Putin gave instructions to make investment decisions on these projects. And they were accepted. And that's where the money went. Now we see that these projects either fail, or this money was spent in an unknown place.

- Do you think that the project is based on political will?

This is the will of one person, who, apparently, acts this way either due to incompetence, or for some reason of his own. This is a pout that is very easy to expose.

- What about the Power of Siberia-2 project?

This is a gas pipeline that will take gas from the same fields that currently provide blue fuel for Europe. Putin has already said several times that if the price on the Asian market is more favorable, we will transfer gas there. If in Europe, then to Europe. But this is actually impossible. It is quite easy for Russia to build this gas pipeline to its own border. But then the adventures begin.

The Chinese, in order to deliver this gas to their industrial areas in the east, need to build approximately another 3,000 km of gas pipeline. During negotiations with the Deputy Prime Minister of China in Moscow, he was offered to finance this project. He said that they would not finance anything.

- It turns out that gas cooperation between Russia and China is still a utopia?

China doesn't need it at all. And this is very well assessed by analysts, for example, at BP. In their forecast until 2035, they showed that the volume of pipeline gas received from abroad in China will not grow. They do not believe that Russia will supply pipeline gas to China in commercial quantities.

For Russia, this cooperation would be beneficial if China agreed to buy this gas if it needed this gas. After all, markets for Russian gas are shrinking. Even internal Russian market shrunk a little. In Europe, too, the growth is extremely insignificant. I don't see any special prospects.

If you take liquefied natural gas, then here Russia has already lost all the competitions. There is an ongoing project in Russia - Sakhalin-2. It was built with the help of Shell. Another Yamal LNG project, which has no commercial value, does not make any difference on the market. Last year, Russia's gas production potential was 174 billion cubic meters greater than what Gazprom was actually able to sell abroad.

A new construction project of the century - a pipe with a diameter of almost one and a half meters stretches confidently across all of Siberia, from Yakutia to Blagoveshchensk. In a year, the Power of Siberia main gas pipeline should be ready for operation: the contract concluded in May 2014 between the Russian Gazprom and the China National Petroleum Corporation (CNPC) provides for annual gas supplies of up to 38 billion cubic meters over 30 years and at the moment signing was estimated at $400 billion. The Russian government still presents this contract not only as a profitable commercial project, but also as its great geopolitical victory. However, there is a downside to “turning east.” Russian taxpayers will subsidize Chinese consumers, and in reality only the contractors of this construction will receive commercial benefits, says Mikhail Krutikhin, partner at the analytical agency RusEnergy.

Mikhail Krutikhin, an expert with 25 years of experience in the energy industry, explains why the Power of Siberia is not worth the money that Gazprom and the state are investing in the gas pipeline.

– In May 2019, according to official press releases, gas supplies to China via the Power of Siberia should begin. In your opinion, how realistic are these plans?

– I think that a more realistic date is around December 2019. We see how feverishly preparations for this date are going on. According to the shortest scenario, to a minimum extent, construction works on the linear part of the gas pipeline. Capacities are being created to prepare gas for pumping it further to China, since it is necessary to extract components from the gas that interfere with the supply of pure methane - in particular, it contains nitrogen (about 7%), helium and other components. New wells are being drilled and the Chayandinskoye field in Yakutia is being developed, which should become the base for gas supplies along this route. So, I think that by December 2019 they can achieve the minimum volume.

– Both the Chayandinskoye and Kovyktinskoye fields, from where gas will go to the Power of Siberia, have not yet been developed and have generally been explored relatively recently. Is Gazprom confident in them?

- Let's start with Chayandinskoye, this is the main, first field where gas will come from. According to all Russian norms and rules, you first need to develop an oil deposit in a field, because if you abandon the oil and immediately pump gas, the pressure will drop and the oil will remain in the ground forever.

Gazprom announced that it had allegedly developed a technology that allows gas to be withdrawn without the pressure in the underground oil reservoir dropping. I talked about this topic with geologists from the largest American oil and gas company, and they laughed at me. Such technology does not exist. Thus, Gazprom is violating all norms; it is leaving huge oil reserves in the ground in order to urgently begin exporting gas. This is the first according to Chayanda.

Second: this field at the very peak of production is not capable of producing more than 25 billion cubic meters of gas per year. This means that Gazprom's promise to supply 38 billion cubic meters per year to China cannot be realized on the basis of this field alone. It is necessary to connect to it a second large field, no longer in Yakutia, but in the Irkutsk region - Kovyktinskoye, which also still needs to be developed and an additional 800 km of pipeline must be built to connect Kovykta with Chayanda. Not yet.

Thus, if we say that gas will flow to China in December 2019, this means that the initial capacity of the entire system will be approximately 4–4.5 billion cubic meters per year. In order to increase the Power of Siberia to 38 billion cubic meters, it is necessary to extract 42 billion cubic meters per year from these two fields. The difference will be spent on isolating components from the gas; gas also needs to be spent on operating compressors at gas pumping stations. If you look at the charts prepared by Gazprom planners and economists, such production can be achieved approximately 10 years after the start of pumping gas to China. That is, it will be possible to reach the target figure not in 2019, but only in 2029.

– Is China happy with such a scheme?

– The Chinese position is generally very interesting, to put it mildly. For many years, the Chinese have resisted the entreaties of Gazprom, which intended to sell them gas along three routes at once. One - through Vladivostok, the second - along the "Power of Siberia", which was not yet called that way, and the third - through the Altai gas pipeline, which is sometimes called "Power of Siberia - 2", from Western Siberia, where the main gas fields of Gazprom are located ".

It was planned to supply 68 billion cubic meters of gas along these three routes: 30 each via Altai and Power of Siberia, and 8 remained to the Far East. The Chinese immediately said, sorry, we don’t need this gas, we are closing our gas balance without you. With great difficulty, year after year, we signed some framework agreements, memorandums of understanding, announced to everyone that we were about to come to an agreement, until, finally, during Putin’s visit to Shanghai in May 2014, we signed a document that 20 minutes before the signing it was called a “Memorandum of Understanding”. That is, he did not oblige him to anything. With great difficulty they persuaded the Chinese to call it a “contract”.

Other persuasion - to supply gas to the Chinese through the Far East, through the Altai gas pipeline - did not bring any results; the Chinese reject all these ideas. When I talked to Chinese specialists in Beijing last year, they told me confidentially: “You know, we are closing our gas balance without Russia, but we will need this Russian gas only in one case - if a difficult military-political conflict develops in the Pacific Ocean.” situation, and obtaining liquefied natural gas from other sources will be difficult or impossible. Then we will ask for gas supplies from Russia." That is, for them it is an emergency exit. And when we say that the Chinese are asleep and see that Russian gas will come to them, this is not true, this is empty propaganda.

– But in our country this contract, when it was concluded, was presented as a major geopolitical victory for Russia.

– This is empty, absolutely empty, propaganda that is not based on anything. Let's remember 2012: Gazprom prepared a justification for investments in the Power of Siberia, and at the end of this document it was said: yes, this project can be of commercial importance, but only if the price of gas included in it is increased by 50– 70%.

They calculated the price of gas in three different versions: it was tied to the price of oil at 60, 75 and 90 dollars per barrel. And according to the investment justification made by Gazprom planners and economists, it turns out that even at the price of the most expensive oil, the project will not pay off even in 2048! This is not a commercial project at all.

Why does Russia need it? Let's see: Russia has a lot of gas, there is nowhere to put it, because in Europe, where all our gas pipelines are aimed, consumption is practically not growing. Liquefied natural gas - we are just, very timidly starting to do something here, and our liquefied gas is not commercially profitable. Or gas must be shipped in the harsh conditions of the Arctic, and then the state takes over the infrastructure, as in the Yamal LNG project. Or again we need to lay pipes somewhere. And where to? The only direction is China.

They desperately began to persuade the Chinese, not paying attention to commerce. What does it mean to “ignore commerce”? This means that the Chinese will buy gas at a price below cost - production cost, pumping cost, plus operating costs and capital investments that need to be invested in this very “Power of Siberia”: in a gas processing plant, in a gas chemical plant and much more. As a result, the Russian taxpayer (Gazprom is, after all, a state company) will subsidize Chinese gas consumers.

When I try to imagine why this had to be done, I have only two options for the possible logic of those who made the decision. And the decision was made at the very top in the Kremlin. The first is window dressing: look, a gigantic geopolitical victory, we have discovered new route export of our gas. Nobody knows how much it cost. And the second motivation is to make money for the contractors who are building this gas pipeline. That's it, I don't see any other motivation. And contractors are known for having estimates that are approximately 2.5-3 times higher than other companies in other parts of the world for the same work.

– Timchenko, Rotenberg, all these guys. They have already distinguished themselves - they built the Sakhalin-Khabarovsk-Vladivostok gas pipeline: there is no gas at one end, and there is no consumption at the other end. The gas pipeline was built, billions of dollars were poured into it for some reason.

– Is Power of Siberia being built with budget money or with money from a state company?

– When this contract was signed in May 2014, Gazprom, already known for false statements, announced that the Chinese had agreed to co-finance the project and would invest $25 billion in the Power of Siberia. As it turned out, the Chinese did not promise anything and did not give a penny. That is, all the money is Gazprom’s money, and therefore Gazprom, which is now forced to spend money on useless, commercially unprofitable, unprofitable projects, over the past three quarters has found itself on the list of companies that produce losses instead of profits. Gazprom's current accounts have red numbers, not black ones.

– Only due to this investment program?

– These are gigantic construction projects with inflated estimates that will never be justified. These were the same politicized projects as “Nord Stream 2”, like “Turkish Stream” - this whole business is not justified.

– In June 2014, there was a message that the president instructed the Ministry of Finance to “think about additional capitalization of Gazprom.” Has this idea been realized?

– Not yet, this has not happened, the only thing is that Gazprom was promised an exemption from some taxes on gas supplies through the Power of Siberia. Well, yes, again at the expense of Russian taxpayers: Gazprom will pay less taxes, and the Chinese will be subsidized by our taxpayers.

– But is there at least some benefit for the economy from this construction? Well, at least she keeps the pipe-rolling factories busy, metallurgical plants, thousands of jobs created...

- Well, then let's lay a pipe to India or somewhere else where absolutely no one needs it! What's the point of this? What, are we going to work in such a way that there is no meaning, no material result? If such work is encouraged, I don’t know what we can achieve.

At one time, Gazprom resisted making an investment decision on the “Power of Siberia,” but in October 2012, after a meeting of the presidential commission on the fuel and energy complex, Vladimir Vladimirovich Putin called Gazprom members to his place and ordered to “accelerate the adoption of investment decisions on your eastern projects.” The investment decision, despite all the resistance of economists even within Gazprom, was made for a obviously unprofitable project.

– Nevertheless, all Gazprom press releases about the “Power of Siberia” are written in a victorious tone.

– Read the Gazprom magazine, it’s even more fun! When some, excuse me, the head of the company Alexey Miller or his deputy Alexander Medvedev opens his mouth, it’s usually a lie, let’s be honest.

– Tell me, please, will the Power of Siberia affect the gasification of Russia’s interior regions in any way?

– In the same justification for investment that we talked about, calculations were made on how much gas through this pipe it will be possible to consume within the country: no more than 4.5 billion cubic meters per year. This is a microscopic value for Gazprom and for Russia. There is simply not enough consumption in this region ( sparsely populated area with undeveloped infrastructure - ER).

And second: gasification of Russia is generally quite an expensive proposition. Our regional settlements are scattered very far from each other, and building a network of gas pipelines is completely unprofitable. Of course, there is a solution for this. This is the so-called distributed energy using local energy sources. This includes liquefied natural gas: you can set up a plant near a large pipe, make liquefied natural gas, and then deliver it by tanker trucks to villages and small towns - to gasify these places.

Gazprom is practically not involved in this, although they once adopted such a program. But this is considered unprofitable for the company. It's much easier to pour money into nobody necessary gas pipelines and in gas development. So many gas fields have already been developed that one more Europe could be added to Gazprom’s consumers even tomorrow. According to our data, the capacity of Gazprom’s unused fields that can be used is more than 200 billion cubic meters per year. There is simply nowhere to supply this gas.

– It’s a shame: they are building the “Power of Siberia”, regardless of any costs, and when it comes to gasification of Russian regions, they begin to count costs and talk about profitability. Although here the costs would be justified at least by improving the quality of life of people. Is not it?

– I don’t have an answer to this question. I just see that the annual salary of the head of Gazprom is approximately the cost of gasification of the Kursk region. What should I do…

– Do I understand correctly that these 800 billion rubles that Gazprom is investing in the Power of Siberia could have been invested in the development of Russian infrastructure?

- Yes, probably. Or, on the contrary, they could use these funds to increase the salaries of senior executives and managers of Gazprom. There are different options here.

– Let’s look at the optimistic option: how many regions would this money be enough for?

– It’s hard for me to say how many regions. According to papers, Gazprom allocates about one billion dollars a year for gasification of Russian regions. But if you look at the end of each financial year to see how much money they actually spent, then the cat cried. And when we see how many villages have been gasified, it doesn’t turn out that this money was used for its intended purpose.

– In your opinion, what would be better for Russia: to stop this construction now or to bring the project to completion?

– A lot has already been done there... I think that it would be possible to complete the minimum version - to bring the pipe to Blagoveshchensk, then stop all this and start developing the oil deposits of the Chayandinskoye field so that they do not disappear. Nicely press the button when gas flows through the Power of Siberia, report a grandiose geopolitical victory and quietly forget about this undertaking so as not to waste more money.

– Don’t spend more money on what exactly?

– To expand construction, to bring it to planned capacity in 10 years. Huge amounts of money will be needed to develop the second field, Kovyktinskoye, for a new 800 km section of the gas pipeline, to prepare gas at a gas processing plant - a lot of things will be required.

They are also planning to add a gas chemical plant to the gas processing plant. And when we look at the list of products that it should produce, we see that, in general, there is no normal market in that region for these products. All this gas chemicals, all these polyethylenes, polypropylenes, styrene and artificial rubbers will have to be exported via railway to the Pacific Ocean, transport by sea. And there the market is captured by competitors - they will have to dump, that is, work again at a loss. The game is not worth the candle, this is again another puffing up of cheeks.

– So, “Power of Siberia” will never be profitable, under any circumstances? What if oil prices rise again?

– All this will not be profitable. Because the Chinese won't pay. They had already concluded agreements with Gazprom on the price formula even before signing this contract, and everything is tied to the cost of oil. Oil will not rise in price now, but will only become cheaper. As I already said, according to Gazprom’s own calculations, there will be no profitability until 2048 (and if we take into account that construction began two years later, then until 2050). This project does not pay off.

- It's clear. This is all very frustrating, to be honest.

- Well, what to do! When we talk about Gazprom, it is either a lie with fanfare, or a complete disorder.

Russia has launched the largest military construction in the Arctic compared to other countries in the world, said Russian Defense Minister Sergei Shoigu, Interfax reported on February 26.

“Since 2013, 545 objects with a total area of more than 710 thousand square meters have been built in the Far North.

No country in the world has carried out such large-scale construction in Arctic latitudes,” the minister said.

He emphasized that “the geography of the construction of Ministry of Defense facilities is extensive - from Kaliningrad to the Kuril Islands and from the southern military bases to the Arctic.”

According to the Minister of Defense, over the past five years, 10,480 buildings and structures have been built in the interests of the military department.

At the same time, Shoigu said that in 2018 it is planned to build more than 3,600 buildings and structures, 117.6 billion rubles have been allocated for these purposes.

Of these, 93.9 billion rubles are for the construction of special and military facilities, including for the deployment of new weapons and military equipment.

Four thousand kilometers of pipe, 770 billion rubles of capital investment, almost 15 thousand builders - this is the Power of Siberia gas pipeline, through which gas will flow from Russia to China

Reference Information:

Name:"The Power of Siberia".
Purpose of the object: main gas pipeline.
Start of construction: year 2014.
Completion: 2019 (reaches full capacity in 2025).
Object cost: estimated at 770 billion rubles.
Who is building (main general contractor/beneficiary): PJSC Gazprom / key figures holding Alexey Miller and Viktor Zubkov.

The Power of Siberia gas pipeline can confidently be considered the largest gas transportation project of our time. With its implementation, Russia will be provided with:

diversification of raw material exports;
more effective development Eastern Siberia;
leading position in the world in helium production.

And the same Eastern Siberia-Pacific Ocean oil pipeline or the Sakhalin-Vladivostok gas pipeline were discussed much more than the “Power of Siberia”. But this does not prevent this gas transportation project from remaining the most ambitious in terms of geopolitical significance.

“The new gas pipeline will significantly strengthen economic cooperation with the countries of the Asia-Pacific region, and, above all, with our key partner - China” (V.V. Putin).

The country had to speed up work on developing gas fields in Eastern Siberia for understandable reasons - relations between Russia and Europe are going through hard times (tension, sanctions and other restrictions).

“To do something in a short time, we need either a megaproject worthy of the scale of Russia, or external stress for mobilization. Now both of these factors have come together in time... “The Power of Siberia” is the largest gas transportation project in the world and the most ambitious, since it will take place in difficult conditions through swamps, rocks, and taiga” (Yuri Shafranik, Chairman of the Council of the Union of Oil and Gas Industrialists of Russia).

With the start of the development of the Chayandinskoye field and the implementation of the project for the construction of the Yakutia - Khabarovsk - Vladivostok gas pipeline, negotiations with China regarding the “eastern route” and the incredibly strong contract between Gazprom and the China National Petroleum Corporation (CNPC), concluded in May 2014 at thirty years worth almost $400 billion. He became a real catalyst for the construction. Russia undertook to supply annually up to 38 billion cubic meters. m.

And already in September, the gas giant began construction of a new gas pipeline, called the “Power of Siberia,” through which gas will flow from the Yakut and Irkutsk fields through the Khabarovsk Territory and Primorye directly to China.

For reference. Gazprom is the undisputed leader in, but also in the world, the only domestic exporter of liquefied natural gas, one of the top ten, PJSC, more than 50% of the shares are owned by the state. IN Forbes ranking Global 2000 in 2017, among the world's largest public companies, Gazprom ranks 40th, this best score among 27 Russian companies. Chairman of the Board, Deputy Chairman of the Council directors of PJSC is Alexey Miller.

The construction promised to become a phenomenon, the most ambitious such project not only on a national scale, but also in the world. Construction must take place in the most complex and heterogeneous geological conditions of the Siberian region. According to estimates, 770 billion rubles will be invested in the Power of Siberia, 4,000 km of pipes will be laid, the throughput capacity of which reaches 61 billion cubic meters. m of gas per year. Construction was planned to be completed in 2017 in order to begin supplies of blue fuel to China in 2019.

Rice. 1. Publication in AiF in September 2014
Source: website aif.ru

Main stages of construction

2012 - readiness of the investment decision, as announced by Gazprom.”

The pipeline was launched in September 2014.

Rice. 2. The President of Russia launched the “Power of Siberia”
Source: website polit.ru

Part of the gas pipeline under construction will go along the already existing corridor of the Eastern Siberia - Pacific Ocean (ESPO) oil pipeline - another large-scale project, which was the main channel through which Russian gas goes to China.

Construction is organized by the largest Russian gas giant Gazprom in two stages:

The Yakutia-Khabarovsk-Vladivostok gas pipeline will stretch from the Chayandinskoye field 2,200 km to the city of Blagoveshchensk, in Altai, from where gas will be sent to China.
More than 700 km to the Kovykta field is not just an expansion of gas flows, but also their redirection from east to west, and vice versa.

In addition to these two, they may be involved in the development large deposits with gas reserves at Chayandinskoye of 1.2 trillion tons and Kovykinskoye of 1.5 trillion tons, others that are located along the route.

Under the Power of Siberia international gas pipeline, gas from Eastern Siberia will be sent both to the domestic Russian market and for export to the eastern regions of China. This project was called the “eastern route”.

Rice. 3. “Power of Siberia” in shallow water conditions
Source: website news.ykt.ru

In addition, plans include the construction largest complex, which includes gas processing, helium and gas chemical production, capable of ensuring the production of commercial and raw gas, propane-butane mixture, polypropylene, glycol, polyethylene.

All work on the construction of the gas pipeline is carried out in accordance with the contract signed with the Chinese side, as well as in accordance with the intergovernmental agreement dated October 13, 2014, which determined the terms of the partnership.

During the construction of a gas pipeline, almost entirely pipes are used domestic production. More than 11 thousand specialists were involved in the construction of the Power of Siberia. About 3,000 people will be involved in the operation of the facility.

Rice. 4. Construction of the main gas pipeline
Source: website vladnews.ru

Social production effect

Industrial.
Metallurgical companies were the first to feel the effect of the construction of the pipeline. This includes the supply of rolled products for more than 7 billion copies of Trubnaya metallurgical company, United Metallurgical Company, ChTPZ and Izhora pipe plant Severstal, which won not only this competition, but also for the supply of pipes together with two other enterprises: Trading House MK and Trubnye innovative technologies" Gazprom will have to purchase 2.5 million tons of pipes; by 2018 alone, 1.7 million tons will be needed.

The increase in sales will also affect machine builders, and specifically KamAZ.
Socio-economic development of territories.
New production facilities will appear around gas fields, which means settlements and cities will develop. “The Power of Siberia” will literally bring life to the vast distances between Western Siberia and the Far East. The southern regions of Yakutia, through which the pipeline will pass, will be among the first to receive an impetus for socio-economic development. Will be gasified 29 settlements in Yakutia, gas will be supplied to at least 6.6 thousand households and 90 industrial and agricultural enterprises, which will allow local enterprises to reduce energy costs and increase efficiency. The gasification program involves the construction of more than 760 km of gas pipelines.
Employment.
Operation of the gas pipeline and work at Gazprom’s production facilities will require the involvement of almost 3 thousand specialists. The holding has already organized personnel training, and among them are local residents. Several Russian specialized educational centers are involved in the process.

"Power of Siberia" today

The “Eastern Route” is now actively being built, even ahead of schedule, as the builders themselves say. Almost 1.5 thousand km of gas pipeline have already been laid.

One of the key facilities is the border crossing near Amur. Here in Chinese and Russian territory Two pits were dug: starting pits on the Chinese side and receiving pits on the Russian side. By November 2017, the builders of the Celestial Empire had completed the panel tunneling of the reserve tunnel, and at the end of 2017, the panel for the construction of the main line was launched.

According to plans, gas supplies will start in 2019, in December, gradually increasing the volume of pumping “blue fuel” to China, and by 2025 they will reach the design capacity.

Mikhail Krutikhin, partner of the RusEnergy consulting agency, expressed doubts about the feasibility of the project, which should supply Russian gas to China from 2019. He shared his thoughts on why the project may turn out to be unprofitable, and why the eastern direction is so important for Russia.

DeutscheWelle: How do you see the fate of the Power of Siberia gas pipeline?

Mikhail Krutikhin: Construction of the Power of Siberia has begun, but is subject to major delays. It is recognized that in 2018 there will be no gas on the border with China. Now they say that deliveries will begin no earlier than 2021. But this also raises doubts. The development of the Chayandinskoye field is progressing with a large lag. And there we still need to build a gas processing plant in the Amur region. So Power of Siberia has dubious prospects. The price of gas according to the agreed upon formula is less than the cost of its production and transportation.

- Are the Chinese skeptical?

- How will the contract be affected by the fall in oil prices?

- Is this contract even necessary?

The Chayandinskoye field, which will supply gas there at the first stage, will not produce more than 25 billion cubic meters per year. And they signed up for 38 billion cubic meters. This means that it is also necessary to use the Kovyktinskoye field in the Irkutsk region. But the horse was not lying there - from there we still need to build 800 km of a gas pipeline for the Chayandinskoye field and develop the field itself. In general, they committed to supplying gas without having any idea how this could be accomplished.

- Why does Russia need this?

Russia absolutely does not need this. This is a huge expense. But this is the political will of the leadership. When the economic feasibility of these projects was calculated, Gazprom economists were categorically against it. These are net losses for Russia, for the budget, for Gazprom. But in October 2012, Russian President Vladimir Putin gave instructions to make investment decisions on these projects. And they were accepted. And that's where the money went. Now we see that these projects either fail, or this money was spent in an unknown place.

- Do you think that the project is based on political will?

This is the will of one person, who, apparently, acts this way either due to incompetence, or for some reason of his own. This is a pout that is very easy to expose.

- What about the Power of Siberia-2 project?

- It turns out that gas cooperation between Russia and China is still a utopia?

Context

For Russia, this cooperation would be beneficial if China agreed to buy this gas if it needed this gas. After all, markets for Russian gas are shrinking. Even the domestic Russian market has shrunk slightly. In Europe, too, the growth is extremely insignificant. I don't see any special prospects.

If we take liquefied natural gas, then Russia has already lost all the competitions. There is an ongoing project in Russia - Sakhalin-2. It was built with the help of Shell. Another Yamal LNG project, which has no commercial value, does not make any difference on the market. Last year, Russia's gas production potential was 174 billion cubic meters greater than what Gazprom was actually able to sell abroad.

Yesterday, Russian gas giant Gazprom celebrated its quarter-century anniversary. In honor of this, the day before, Russian President Vladimir Putin spoke in the Kremlin with the head of the corporation, Alexei Miller. The President noted the successes of Gazprom, which now operates in 34 countries around the world, and wished all the company’s employees further success.

In response, Alexey Miller spoke about most important achievements Gazprom, which currently ranks first among the world's 250 leading oil, gas and electricity companies. Russian company owns 17% of the world's natural gas reserves.

One of most important projects Gazprom's Power of Siberia gas pipeline to China. True, since it is not accompanied by the passions that burn around Nord Stream 2, less is known about it from the press. But two-thirds of the pipes have already been laid, and gas launch is planned for the end of next year.

According to the head of the holding, Gazprom has already laid more than 1,520 kilometers of gas pipeline. In fact, the Russian energy company has completed the construction of the linear part of the Power of Siberia from the Chayandinskoye field by 60%.

"And in next year“On December 20, pipeline gas supplies will begin to the most dynamic gas market in the world – the Chinese market,” Miller noted.

To lay the gas pipeline, Gazprom received almost all the necessary large-diameter pipes (LDP). Currently, the corporation has 1.725 million tons of LDP at its disposal, which is equivalent to 2.144 thousand kilometers of single-strand pipeline. But, according to the plans, the total length of the first stage of the pipeline (from the Chayandinskoye oil and gas condensate field to the border with China) is 2,158 thousand kilometers.

Construction is progressing clearly ahead of schedule. At the most key site of the highway (at the border crossing on the border with China), two starting pits were dug on the Chinese side and two receiving pits on the Russian side. And at the end of 2017, a shield for the construction of the main line was launched from the Russian-Chinese border

Next year gas supplies to China will begin. In the first year of operation of the Power of Siberia, the Chinese will receive only 4.6 billion cubic meters, but in 2021 Gazprom intends to gradually increase capacity in order to reach the planned 38 billion cubic meters by 2025.