While an agreement on price is still elusive, Moscow and Beijing have come up against another hurdle in their more than 10 year talks to secure a gas deal - they cannot agree on whether China should pay up front.
Sources close to Russia's Gazpromand in the gas industry said the state-controlled company wanted China to pay $25 billion now to secure future gas supplies, which should start in 2018 at a yearly rate of 38 billion cubic metres.
China has so far been reticent, concerned that other gas suppliers, namely former Soviet Turkmenistan, would also want pre-payment and the standoff may scupper a deal Moscow hopes to hold up to the West as proof that it does not need its custom.
"We are pinning our hopes on Putin's May visit," a source at Gazprom said.
"There are some problems with finances. They are thinking
(in Gazprom), what is more beneficial, a loan from China or an advance payment? That's why they can't reach the final agreement on the pricing."
A Gazprom spokesman declined to comment.
Gazprom needs to raise a lot of money to build the infrastructure to take the gas to China.
It has earmarked over 770 billion roubles ($22.2 billion) for the Sila Sibiri (Power of Siberia) gas pipeline to China from the Eastern Siberia's Chayanda deposit. In addition, 430 billion roubles are needed for the field development.
The company may want to emulate state-controlled oil company Rosneft, which secured large advances on its exports to China, receiving at least $12 billion late last year as part of a deal to ramp up supplies, according to industry sources.
At 38 bcm per year, Russian gas supplies would be equal to nearly a quarter of current consumption and make up nearly a 10th of China's estimated total gas demand by 2020.
Putin is scheduled to visit China on Tuesday and Wednesday and is expected to sign a number of deals. [ID:L3N0NW05M]
However, the gas deal is key for Moscow's attempt to forge closer ties with Asia amid the deepest East-West rift since the end of the Cold war over Ukraine.
Gazprom's average gas sale price to Europe last year was $10.60 per million British thermal units - the pricing standard used in the global gas trade. That works out at $380 per 1,000 cubic metres according to the pricing convention used in Russia.
Industry sources have said Gazprom was hoping for $10-$11 per mmBtu from China. China is understood to pay $9 per mmBtu to Turkmenistan, the former Soviet state in Central Asia that beat Gazprom to the Chinese market.
"The key sphere of bilateral practical cooperation is energy," the Kremlin said on Monday it its fact sheet before Putin's visit to China.
"The talks over pipeline gas supplies (to China) via the
"Eastern route" are in the final stage."
Source: Reuters
Sources close to Russia's Gazprom
China has so far been reticent, concerned that other gas suppliers, namely former Soviet Turkmenistan, would also want pre-payment and the standoff may scupper a deal Moscow hopes to hold up to the West as proof that it does not need its custom.
"We are pinning our hopes on Putin's May visit," a source at Gazprom said.
"There are some problems with finances. They are thinking
(in Gazprom), what is more beneficial, a loan from China or an advance payment? That's why they can't reach the final agreement on the pricing."
A Gazprom spokesman declined to comment.
Gazprom needs to raise a lot of money to build the infrastructure to take the gas to China.
It has earmarked over 770 billion roubles ($22.2 billion) for the Sila Sibiri (Power of Siberia) gas pipeline to China from the Eastern Siberia's Chayanda deposit. In addition, 430 billion roubles are needed for the field development.
The company may want to emulate state-controlled oil company Rosneft
At 38 bcm per year, Russian gas supplies would be equal to nearly a quarter of current consumption and make up nearly a 10th of China's estimated total gas demand by 2020.
Putin is scheduled to visit China on Tuesday and Wednesday and is expected to sign a number of deals. [ID:L3N0NW05M]
However, the gas deal is key for Moscow's attempt to forge closer ties with Asia amid the deepest East-West rift since the end of the Cold war over Ukraine.
Gazprom's average gas sale price to Europe last year was $10.60 per million British thermal units - the pricing standard used in the global gas trade. That works out at $380 per 1,000 cubic metres according to the pricing convention used in Russia.
Industry sources have said Gazprom was hoping for $10-$11 per mmBtu from China. China is understood to pay $9 per mmBtu to Turkmenistan, the former Soviet state in Central Asia that beat Gazprom to the Chinese market.
"The key sphere of bilateral practical cooperation is energy," the Kremlin said on Monday it its fact sheet before Putin's visit to China.
"The talks over pipeline gas supplies (to China) via the
"Eastern route" are in the final stage."
