Give China credit for striking while the iron's hot.
As Vladimir Putin visits Beijing with an eye toward building up much-needed political capital, China seems to have forged a natural-gas megadeal in its favor. After more than a decade of negotiations, and a bit of on-again/off-again brinkmanship, China National Petroleum Corp. finally signed a contract Wednesday with Russia's Gazprom.
Details of the contract are predictably murky, but Gazprom values the deal at $400 billion over its life. Last year's negotiations yielded an agreement to supply at least 38 billion cubic meters of gas a year for 30 years starting 2018. The final deal suggests an implied price for the gas of about $350 per thousand cubic meters.
At that price, China may have just gotten the better of Russia. This is roughly what it pays for Turkmen gas, its current biggest gas import, and is much cheaper than Asian liquefied natural gas at about $625 per thousand cubic meters.
It hasn't all cut China's way, however. Assume volumes take five years to ramp up to 38 billion cubic meters, notes Citigroup, and the implied contract price is closer to $380, roughly around where Gazprom sells gas to Europe. Gazprom also gets its wish for a price that moves in step with oil, similar to its European contracts; this protects it should gas prices fall, even as oil prices rise. The Russian company also seems to have refused China's wish to own Siberian assets.
Judging the contract's value to Gazprom involves more guesswork. Analysts Wednesday put the return on it at between 10% and 12%, just in line or slightly above Gazprom's cost of capital.
Even so, with Europe questioning its energy relationship with Moscow after the latter's foray into Ukraine and the U.S. awash with cheap shale gas, there is strategic value in showing the world that Gazprom has other buyers. The Chinese contract, too, is supposedly the first step in a broader push to sell gas eastward, as well as to the West.
But any calculations rest on flimsy foundations without clarity over what Gazprom will need to invest to fulfill its Chinese obligations. Russian suggestions Wednesday that spending could amount to $55 billion weren't clear on what infrastructure that bought or whether that investment would take Gazprom's export capacity to China to 38 billion cubic meters, or the eventual target of 60 billion.
The Russian company has prodigious cash flows from which to finance the project; it could reportedly get $20 billion in cheap Chinese financing to help, too. But Gazprom trades at just 3.2 times forecast earnings, partly due to its slapdash approach to spending. One hope is that investment to supply China, with the promise of future earnings growth, displaces downright wasteful and strategically useless expenditure elsewhere--a low bar by which to judge success.
For now, the Chinese have more moving in their favor. It is unclear whether CNPC or its listed arm PetroChina will buy the gas. But either way, Beijing last year began raising local gas prices closer to market levels, a boon to the companies.
There is always a risk that Beijing slows reform and calls upon the state-owned firm to subsidize consumers. But at the current pace, PetroChina should be able to pass the full price on to consumers by 2018, meaning neither gains nor losses on exports. The company currently loses money on its gas imports. The deal is also good news for gas distributors such as Kunlun Energy and China Gas, who see volumes growing over time.
Over time, this megadeal will upend Asia's gas markets, too. Its price could put pressure on higher-cost LNG producers in Indonesia and Australia. Like the U.S. shale-gas revolution that helped seal it, the Russia-China deal could be another marker of a cheaper-gas world.
但中国政府改革步伐放慢并要求国有企业补贴消费者的风险总是存在的。不过按照目前的改革速度，2018年中国石油应当可以将成本完全转嫁给消费者，这意味着天然气出口既不赚钱也不会亏钱。目前中国石油的天然气进口业务处在亏损状态。中俄天然气协议对于昆仑能源(Kunlun Energy)和中国燃气(China Gas)等燃气分销商来说也是好消息，这些公司的业务量会逐渐增多。