Power of Siberia (Sila Sibiri)

Gas contract between Russia and China to be signed before the end of the year

The agreements on the supply of the Russian gas to China via the Western route might be reached before the end of the year if proper circumstances, Minister of Energy of the Russian Federation, A.Novak said. RIA Novosti reports.
“We have no strict deadline. There held gas talks between Gazprom and CNPC. As soon as we reach agreements on the price, the terms of gas pipeline construction and gas supply, we will be able to say more concrete things. We hope to do it before the end of the year, if the companies agree,” Minister said.

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The start of gas transporting via Power of Siberia is postponed for 2 years

The development of gas and its transporting via Power of Siberia from the Chayandy deposit will start in 2020 instead of 2018, the Vice Director of the Chayandy department of Gazprom Production Noyabrsk, V. Selin says. Now they plan for 2018 to fill in the gas pipeline and to accomplish precommissioning. Gas transporting is planned for 2020. Gas production at Chayandy will be 5 billion cubic m in 2019 with a further enlargement to 10.4 billion cubic m by 2020, and even 25 billion cubic m by 2024. They are also going to develop the satellite deposits by 2030. Currently they hold exploration drilling at Chayandy and then will start production operations of the wells.

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­­­Gazprom can pay in advance for 30-40% of pipe supplies for Power of Siberia

­­­Gazprom can pay in advance for 30-40% of pipe supplies for the Power of Siberia project to the pipe companies, and in exchange, they can grant to the company discount at a rate of not less than 10%, the OMK representative claims.
On Thursday, Gazprom and the Russian pipe plants agreed on the price formation scheme when construction of the pipeline on the principle of advance payment in exchange for discounts.

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Severstal confirms its willingness to participate in major infrastructure projects of Gazprom.

JSC "Severstal" took part in the regular meeting of OAO "Gazprom" with manufacturers of large diameter pipes, which took place on the basis of the Vyksa smelter (JSC "United Metallurgical Company").
The meeting was attended by Alexey Miller, the Chairman of the Management Board of OAO "Gazprom", and the executives of the pipe companies. During the meeting the parties discussed the willingness of the companies to the supply of pipes and pipe fittings for South Stream and the Power of Siberia gas pipelines, as well as the implementation of scientific and technical cooperation programs.
In addition, during the event Gazprom and the pipe producers signed an agreement on the use of special pricing conditions in the supply of large-diameter pipes for the construction of the Power of Siberia. The agreement was signed by CEO Alexei Mordashov on behalf of Severstal.

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Gazprom and pipe companies agree on discounts for Power of Siberia

Gazprom is ready to grant advance payments to the Pipe Companies for the first time, but in exchange for this it requires some discounts. These are the special conditions for the main Russian-Chinese project, the Power of Siberia pipeline costing around 1.5 trillion rubles. The pipe manufacturers themselves find the agreement beneficial, but analysts fear a decline in the sales margins for the project to zero.
Yesterday, Gazprom and the Russian pipe companies - Dmitry Pumpyanskiy’s TMK, Anatoly Sedykh’ OMK, Andrei Komarov’s ChTPZ and the Izhora pipe plant (a part of Severstal of Alexei Mordashov) - signed an agreement on special pricing conditions in the supply of large diameter pipes for the main gas pipeline Power of Siberia. "We will consider the possibility of granting advances, and they - discounts," - the head of Gazprom Alexei Miller said.
"Right now, payment is conducted upon shipment, the new conditions which will come into force from October 1st," - the Association of Pipe Producers says. According to sources of the Kommersant in the industry, the advance may reach 40%, it will be given one month prior to delivery, and the discount can be up to 10% of the base price of a pipe, calculated by the formula (is in force from 2012). "Today, Gazprom’s tenders for LDP are as follows: a base price is determined by the formula for each type of pipe, then the producers decide how much they are willing to give up," - one of the Kommersant’s sources in the industry explains. The companies usually grant a discount in the amount of 2-3%. Officially pipe manufacturers and Gazprom don’t comment on the agreement.
The Power of Siberia gas pipeline with capacity of 61 billion cubic meters of gas per year is constructed for the supply to China. The length of the pipeline is about 4 thousand km, the route construction will require about 2.6 million tons of pipes. The investments will amount to about 1.5 trillion rubles.

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Russian metallurgy increases

After stagnation of 2013, the Russian metallurgic sector has increased production again despite he common negative tendencies in the economy balancing near the zero. In H1 2014, the sector increased by 2.4% compared to 1.2% in Q1 2014.
The rolled steel yield increased by 3.9% including by 4.7% more of sort steel and by 3.7% more of steel plates. Sort steel yield increases mostly at the expense of growth in demand at the internal market by the construction sector. Last year they launched several new electric metal mini-mills producing hardware with total capacity of over 1.5 million tons. Steel plates yield increases at the expense of growth in exports. FTS reports that exports of flat sections made of carbonaceous steel increased in H1 2014 by 5.3% to 4.0 million tons, the highest results for the latest 4 years. Growth in exports is connected with ruble devaluation and political crisis in the Ukraine due to that the Ukrainian metal commodities was partially substituted with the Russian analogues. Due to this reason in 2014 one can observe growth in internal demand for the commodities of the Russian metal plants.

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The Chinese do not give "Gazprom" the money for the construction of the "Power of Siberia".

The question of the advance payment to "Gazprom" under the contract with China's CNPC is hung in the air, Alexander Medvedev, the deputy chairman of the company, stated (quoted by "Interfax"), but there is no need for the advance payment. The advance payment could be a tool for China to reduce the price of gas because of the current customs duty regime, he continued, the advance payment may be beneficial for both sides, but there is nothing critical in the use or non-use of the advance payment, so "Gazprom" has already begun the construction of the pipeline ["The Power of Siberia" to supply gas to China]. "
Medvedev did not mention how the advance payment was linked to the duty, and the representative of "Gazprom" declined to comment.

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"Gazprom" plans to put the "Power of Siberia" into operation in 2018-2020.

"Gazprom" plans to build the "Power of Siberia" gas pipeline in 2018-2020, Aleksandr Medvedev, the Deputy Chairman of OAO "Gazprom" stated at the annual "Oil and Gas Sakhalin" conference, RBK reports.
The terms will depend on the completion of the construction. According to Medvedev the supply of gas through the pipe will not compete with the LNG supply.
The gas supplies, according to the terms of the contract, due to start in four years after the conclusion of the intergovernmental agreements, Medvedev stated. "We hope that they will be able to be concluded this year", - he added. An important condition for the start of the deliveries is the infrastructure on the Chinese side. While the works are on schedule there, the deputy president of "Gazprom" added.

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Mikhail Khodorkovsky: Sila Sibiri is economically unprofitable project

The ex-chief of Yukos Mikhail Khodorkovsky thinks that Sila Sibiri is economically unprofitable project. It will gain zero at its best. Russia builds it to make something bad to the West. However, it promotes the Chinese industry in fact, he says to Vedomosti. From the strategic point of view, the situation is even worse: China needs Russia as a raw material resource.

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Gazprom is going to close the contract for gas supplies to China in November

The Ministry of Energy of Russia hopes that the contract for oil supplies to China via the western route will be closed within APEC summit held in Beijing in November. The Energy Minister, A. Novak says that the precise date depends on the coordination of both sides. The Ministry would be glad if the Russian and the Chinese sides reached an agreement by that time. The route has not been discussed as yet but the basic variant is Altai.

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