Together with my better half and close friends, I visited Mt. Rushmore and two national parks, Badlands and Wind Cave, in South Dakota over the weekend. We were super impressed by the warm people we met. It was such a change from busy city life.
Now let’s dig into two pieces of energy news from the past week.
Shangyou Nie
Editor, Well Read
Russia Signs the Big Gas Pipeline Deal With China
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Alexei Miller, CEO of Russian gas giant Gazprom, announced last Tuesday that his company and CNPC had signed a “legally binding” memorandum to build the Power of Siberia 2 gas pipeline. If agreed and constructed, the pipeline could deliver 50 bcm of Russian gas to China annually, with a profound impact on global gas trading, including LNG. China is, however, notably quiet about the deal.
What Gazprom is saying:
According to the Moscow Times, Miller said, “The construction of the Power of Siberia 2 gas pipeline, the Soyuz Vostok transit pipeline through Mongolia, and the related gas transportation facilities in China will now be the largest, most extensive, and most capital-intensive project in the global gas industry.”
According to Miller, the deal is for 30 years, though if the pipeline is constructed, it is not expected to be in operation until the 2030s.
The pipeline will have a capacity of 50 billion cubic meters per year.
A number of key elements are not specified, including gas price, a key to a final investment decision, financing, and project start time.
The big picture:
China and Russia signed a definitive agreement to build the Power of Siberia 1 pipeline on 21 May 2014.
Construction for POS1 started in September 2014 on the Russian side and in June 2015 on the Chinese side.
POS1 runs from Russia’s Far East and enters China in the Northeast via Heilongjiang Province.
Final connection to Shanghai was not completed until December 2024.
POS1 started to deliver gas to China in December 2019. It was running way below its designed capacity of 38 bcm/year—partly due to Covid-19—until 2025.
According to the Russian press, China's purchase price for Russian pipeline gas via POS1 is oil-indexed and estimated to be $265–285 per 1,000 cubic meters, or between $7.50–$8.07 per million cubic feet.
China reportedly wants the gas price for POS2 to be close to the domestic gas price in Russia (around $3.5/mmcf), while Russia wants it close to that for POS1.
By the numbers:
According to the UK-based Energy Institute, China imported 71.3 bcm of pipeline gas in total, including from Russia (26.7 bcm, 37%) in 2024.
In 2024, Turkmenistan was China’s top pipeline gas exporter at 32.8 bcm or 46%, followed by Myanmar (4.7 bcm), Kazakhstan (4.5 bcm), and Uzbekistan (2.5 bcm), according to the Energy Institute
The estimated cost for the POS2 pipeline still has a large range between $13.6–$34 billion, according to the Russian press.
Russia's pipeline gas export to Europe is expected to drop from 157 bcm in 2021—before Russia’s invasion of Ukraine—to 39 bcm in 2025.
China imported 276 bcm of gas in 2024, about 40% of its total gas demand.
China’s gas import has a mixture of 60% LNG and 40% pipeline gas (40%).
In 2024, China imported 105 bcm of LNG, with the top five exporters being Australia (35.8 bcm), Qatar (25.2 bcm), Russia (11.4 bcm), Malaysia (10.5 bcm), and the United States (5.8 bcm)
What China is (not) saying:
Neither the Chinese government nor the CNPC has made any public statement about the POS2 gas pipeline deal.
Chinese media said that more than 20 cooperation documents were signed during Putin’s visit, without mentioning the gas pipeline deal.
According to its report entitled, “Russia says China has agreed vast new Siberia gas pipeline,” the Financial Times said the two sides signed a “memorandum of construction” for POS2 during Putin’s visit to China.
FT said that “the document covered general terms and omitted details on pricing, the main stumbling block.”
The Russian announcement was “a bit premature,” commented Victor Gao, VP for the Center for China and Globalization, a non-government think tank in China. “This may be more of their intent rather than an agreement already reached,” added Gao, though in an unofficial capacity.
Why is China quiet about the deal?
Similar to the lack of public statements around POS1 until the deal was finalized, China might have several economic and geopolitical reasons for being quiet thus far about the deal.
Gas supply security and import prices are the two biggest considerations for China. Supply diversity and low prices are strategic for China.
There is reportedly a policy for China not to depend on more than 20% of gas imports from any one single country.
China might be concerned that it could become too dependent on Russian gas imports in the future.
China’s gas demand could grow to 600 bcm by 2040, according to CNPC’s energy outlook 2024; but by 2050/2060, China's gas demand could decrease to 400 bcm or lower, due to the rapid growth of renewable energies.
Combining Russian gas imports from POS1, POS2, and LNG, China's gas imports from Russia could reach 100 bcm.
This would mean that by 2040, gas imports from Russia might not be over the 20% import limit, but by 2050/2060, gas imports from Russia could far exceed the 20% limit.
Geopolitically, China and Russia are engaging in tough trade/tariff negotiations.
How much China will be willing to commit to buy US LNG could be a key part of the ongoing negotiations.
Whether to have more Russian pipeline gas imports or US LNG imports is a key consideration for China.
Gas price is the key; without the agreement on gas price, the deal is not final, and the project remains uncertain.
What did they say:
Russian President Vladimir Putin said that gas price for POS2 will be based on “market principles” set “by a certain formulation.”
“Talks will now focus on financing the pipeline’s construction and the commercial terms of supply,” said Alexei Miller, according to Tass.
According to Alexander Gabuev, director of Berlin-based Carnegie Russia Eurasia Center, China was signaling “yes, we’re interested, we accept the route through Mongolia—but let’s talk about price and terms.”
Some analysts still doubt whether the POS2 would actually happen, due to financing and other economic and geopolitical considerations.
For example, Washington-based think tank Atlantic Council published a paper on September 5, entitled “Why China and Russia are unlikely to move the Power of Siberia-2 pipeline forward.”
“But the pipeline is unlikely to advance—at least not with great urgency. Moscow’s enthusiasm for the project is not matched by Beijing,” according to Joseph Webster and Landon Derentz, the authors of the Atlantic Council article.
What to watch for:
When can Russia and China sign the definitive agreements on gas prices and take FID to start construction of Power of Siberia II?
How might this big deal influence US–China trade negotiations, including China’s commitment to purchase more US LNG?
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Shell has signed an agreement to study a deepwater block, together with Chevron, in Angola, marking the return of the UK major to Angola after more than 20 years’ hiatus. This is a continuation of European majors and American IOCs trying to secure more international acreage as companies try to (re-)focus on oil and gas growth. We thank Shell for providing direct input to this write-up.
About the Shell re-entry to Angola:
According to a written statement to AAPG on 8 September from the office of Eugene Okpere, Shell’s EVP for Exploration, Strategy and Portfolio, “We have signed a preliminary agreement with Chevron and ANPG—the oil and gas regulator in Angola—that will allow Shell to take part in exploration activities in Block 33 in offshore Angola.”
“This move signals a re-entry to Angola, which is amongst Africa’s leading oil producers, and aligns with Shell’s strategy to maintain our liquids production.”
“Shell also signed an MOU with ANPG on exclusivity and a study phase for 7 blocks in November 2024. We have completed our initial study with Equinor and Sonangol, who joined as partners in the MOU in 2025. We are progressing with the next phase of discussions to agree on concession agreements.”
“We are looking at other investment opportunities within Angola and hope to share more as time progresses,” Shell concluded in its written statement to AAPG.
Last week, Bloomberg reported that Shell and Chevron, together with Angola’s national company Sonangol, signed an agreement with the National Agency of Petroleum, Gas and Biofuels (aka ANPG) for Block 33.
Chevron will reportedly be the operator for Block 33.
The OPEC member country is Africa’s # 4 oil producer after Nigeria (1,641,000 bod), Algeria (1,380,000 bod), and Libya (1,188,000 bod).
In the past decade, Angola’s production has been declining at an average of 3.6% per year.
Since 2019, the Angolan government has tried to improve fiscal terms and streamline the licensing process to attract new investments.
Angola will hold a bid round for five oil blocks before the end of 2025, from a previously planned 10-block offer.
Five other blocks were signed with yet-to-be announced investors, according to Upstream.
In the early 1990s, Angola's deepwater was a part of the “golden triangle” of deepwater exploration on both sides of the Atlantic basin, including the Gulf of Mexico (Gulf of America), Brazil, and West Africa.
ExxonMobil, Total, Chevron, and BP made large oil discoveries in the 1990s.
Shell also found oil in their holdings, but not to the same level of success as the other big IOCs.
Shell decided to exit Angola around 2000.
Block 33 was formally operated by TotalEnergies.
The block is part of the open acreage and includes two small discoveries—Calulu and Sumate.
What they’re saying:
“The expectation is that this move (Shell re-entry) will inspire other supermajors to explore opportunities in deep and ultra-deep waters, contributing to the relaunch of the national oil industry,” said an official from Angola’s Ministry of Mineral Resources, Oil & Gas.
Oil & Gas Minister Diamantino Azevedo said last Wednesday at the Angola Oil & Gas 2025 conference in Luanda, “Where there is tranquility and a good business climate, investment comes,” according to Upstream.
Paulino Jeronimo, ANPG’s head, commented on the end of 2024 MOU signing as “an important moment for both institutions” and that he hoped “negotiations and studies will progress towards new contracts.”
🚨 Trend alert:
For majors such as Shell, country (re)entry represents a major decision point.
Shell will focus on oil, rather than gas prospects, in its current and potential investments in Angola.
This is the latest example of major IOCs competing for international acreage for oil/gas growth.
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