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Russia may delay gas and crude oil deal with China

"Russia's new energy agreements with China are vague. No route or cost estimates have been given for the gas pipelines and only a sketchy timetable has been provided."

from a Standard & Poor's report

Russia's government may delay an agreement to supply crude oil and gas to China through pipelines because of domestic opposition, a Standard & Poor's report said.

Russian people are concerned that Chinese imports are threatening local industries and Russian President Vladimir Putin may not want to be seen to be increasing China's influence over his country, S&P's analysts, including Bei Fu in Hong Kong, wrote in a report on Wednesday.

China needs to secure oil and natural gas supplies to meet energy demand in an economy that grew 9.9 percent last year. Chinese President Hu Jintao (胡錦濤) wants an US$11.5 billion oil pipeline from eastern Siberia to the Pacific port of Nakhodka to include a spur to China, the world's second-biggest oil consumer.

The report said that, "Finding diverse and stable energy supplies such as from Russia, is critical for China over the long term."

Russia agreed in March to build two pipelines from the country's Pacific coast to China.

"Russia's new energy agreements with China are vague," the S&P report said. "No route or cost estimates have been given for the gas pipelines and only a sketchy timetable has been provided."

OAO Gazprom, Russia's largest gas producer, may export as much as 80 billion cubic meters a year of natural gas to China through the two new pipelines, Gazprom chief executive officer Alexei Miller said on March 21.

China National Petroleum Corp (中國石油天然氣), the nation's biggest oil company, will finance a feasibility study of an oil pipeline linking Russia and China, Russian Energy Minister Viktor Khristenko said on March 21.

Under the agreement, the first pipeline will run 3,000km from western Siberia to China's western region, and the second from eastern Siberia to northeastern China, the S&P report said.

China in December raised factory prices for natural gas and changed its pricing mechanism of the fuel to move in line with demand in the local market.

By increasing prices, Beijing hoped to encourage companies to invest in gas plants, ensuring steady supply.

Prices for natural gas used by industries and city-gas distributors increased by between 50 yuan (US$6.19) and 150 yuan per thousand cubic meters, according to the Beijing-based National Development and Reform Commission, China's top economic planner, on Dec. 26.
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