Russia gas deal with China could drive up energy costs in Europe

THE CHINESE and Russian government signed a $400bn (£237.1bn) gas deal yesterday, which some analysts believe could drive up gas prices in Europe when it comes into force.

The agreement means that Gazprom will pipe gas into China for 30 years, beginning in 2018. At its peak, it will supply 38bn cubic metres of natural gas to China.

According to Aled Jones, head of Anglia Ruskin University’s Global Sustainability Institute, this could push up competition for Russia’s gas and drive up prices in the EU.

“Russia’s new pipeline to China will increase competition for natural gas from 2018 and will most likely increase the cost we pay for natural gas here in the EU. It will certainly increase the pressure on European countries to find alternative gas supplies,” said Jones.

He added that the amount that will eventually be sold is the equivalent of over a tenth of Russia’s natural gas exports, and a quarter of China’s energy use in 2012.

“The EU does not have sufficient, currently proven, economically viable reserves of natural gas to meet their own demand in the short to medium term, so we are reliant on natural gas imports from countries such as Russia,” Jones concluded.