Huge Russia-China Gas Deal Still Leaves Door Open To Japan

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China may end up helping out rival Japan thanks to its $400 billion Russian gas deal.


TOKYO, June 8 (Reuters) – For once, China looks to have done Japan a favour.

In clinching a $400 billion deal last month to buy Russian gas, China may end up helping out its old political and economic rival in a way that matters hugely for Japan: energy security.

The China-Russia agreement, the biggest gas deal ever, unlocks new gas supplies and could bring down gas prices across Asia, a development that would pay the biggest dividends for Japan, the world's top buyer of liquefied natural gas.

Other big Asian gas buyers such as South Korea and Taiwan could also benefit.

The deal, signed on May 21, cemented a dramatic shift in energy flows from the West to the East. Gas will be transported to China via a new pipeline linking Siberian gas fields from 2018, building up gradually to 38 billion cubic metres a year.

China has massive gas needs, but access to more of the fuel is also vital for Japan since its utilities pay the world's highest prices. Japan buys about a third of global LNG shipments and spent a record 7.06 trillion yen ($70 billion) last year, mostly for electricity generation to replace idled nuclear reactors following the Fukushima disaster in 2011.

There are hopes that piping Russian gas to China will create a new price benchmark that could cut prices for Asian LNG buyers as well as providing new gas sources.


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Copyright 2016 Thomson Reuters. Click for Restrictions.


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