Gas

Russia and China in Talks on Stalled Power of Siberia 2 Pipeline

Published

4 weeks ago

May 9, 2025

Russia and China resume negotiations on the delayed Power of Siberia 2 pipeline amid pricing and demand issues.

Russia and China plan to revisit discussions on the stalled Power of Siberia 2 gas pipeline. The talks will occur during Chinese President Xi Jinping’s state visit to Russia from May 7 to 10 for Victory Day commemorations.

Russia has been seeking an agreement with China to construct the Power of Siberia 2 pipeline. The pipeline would transport 50 billion cubic metres of natural gas a year from the Yamal region in northern Russia to China via Mongolia.

President Putin of Russia initially proposed the Power of Siberia 2 to Xi in 2022 following Russia’s invasion of Ukraine. The consequence of Russia’s invasion was a steep plunge in the European Union’s gas imports from Russia.

Since Russia’s invasion of Ukraine in February 2022, Russia has heavily leaned on the Chinese market to make up for its lost exports to Europe. In 2021, before the war, Russia exported over 157 billion cubic meters of gas to Europe

Construction of the pipeline was initially scheduled to begin in 2024, but it has been plagued with commercial disputes.

The Power of Siberia 2 is now critical to Russia amid the European Union’s plans to halt all remaining gas imports from Russia by 2027.

The proposed pipeline would strengthen Russia’s ability to export gas to China and other Asian markets.

Russia’s first Power of Siberia pipeline came online in 2019. It achieved its full capacity of 38 bcm per year by the end of 2023.

As the European Union moves away from Russian gas, PoS-2 is part of Moscow’s long-term energy pivot to Asia.

The Power of Siberia 2 Pipeline: Russia’s Pivot to China

The proposed pipeline would bring gas from Russia’s massive Yamal peninsula in western Siberia through Mongolia to China.

The first Power-of-Siberia pipeline spans 3,000 km through Siberia and into China’s northeastern Heilongjiang province.

According to a map by Russia’s Gazprom, the new route would cut through eastern Mongolia and northern China.

Key Specifications

Origin: Yamal gas fields, Western Siberia, Russia
Route: Yamal Peninsula (Russia) → Mongolia → Northern China
Length: 2,600 km
Capacity: 50 BCM/year
Operator: Gazprom
End Market: Northern China, including key industrial hubs

As the European Union moves to halt all gas imports from Russia by 2027, Russia needs alternative buyers for its massive gas reserves. The Power of Siberia 2 helps redirect Russia’s gas exports from Europe to Asia, especially China.

The Power of Siberia 2 will enable China to reduce its reliance on LNG imports from key chokepoints like the Strait of Malacca, which are vulnerable to the US and India’s naval blockade.

Factor	Russia’s Strategic Gain	China’s Strategic Gain
Market Diversification	Redirecting its vast gas reserves from the European Union to Asia, especially China	Reduce its reliance on LNG imports from exposed chokepoints like the Strait of Malacca
Geopolitical Leverage	Strengthening China-Russia alliance	Gain tremendous influence over Russia’s oil and gas exports
Economic Stability	Lifeline for Gazprom and state revenue	Low-cost, reliable gas supply
Regional Influence	Expanding geopolitical influence in Mongolia and Central Asia	Securing energy dominance in East Asia

Power of Siberia 1 vs Power of Siberia 2 Pipeline: Comparison

Feature	Power of Siberia (PoS-1)	Power of Siberia 2 (PoS-2)
Status	Operational (since December 2019)	In negotiation phase
Route	Eastern Russia to Northeastern China (via Heilongjiang)	Western Siberia → Mongolia → Northern China
Length	~3,000 km	~2,600 km
Transit Countries	None (direct Russia–China pipeline)	Mongolia
Planned Capacity	38 billion cubic meters (BCM) per year	50 billion cubic meters (BCM) per year
Source Gas Fields	Chayandinskoye & Kovykta fields (East Siberian fields)	Yamal Peninsula (Western Siberia)
Customer	China National Petroleum Corporation (CNPC)	Targeted to CNPC, however, contract yet to be not finalized
Contract Signed	Signed in 2014 (30-year agreement)	No final supply contract as of May 2025
Strategic Role	China’s eastern gas diversification	Major redirection of Russian gas exports to Asia as Europe moves to stop all imports by end of 2027
Geopolitical Significance	Cemented early Russia–China energy ties	Critical to Russia’s pivot to Asia amid US/UK/EU economic sanctions (Russia’s Invasion of Ukraine)

Mongolia’s Role in the Pipeline Route

Mongolia will play a vital transit role in the proposed Power of Siberia 2 gas pipeline. The country will be the critical geographical corridor connecting Russia’s Yamal gas fields to northern China.

Mongolia’s cooperation is essential for the 2,600-kilometre pipeline to become operational.

The Soyuz Vostok pipeline, the Mongolian Power of Siberia 2 segment, will span over 950 kilometres within the country.

Mongolia could earn billions of dollars annually in transit fees once the pipeline becomes operational.

However, Mongolia must balance its ties with Russia and China without compromising its “third neighbour” policy (maintaining ties with the West).

Key Sticking Points in Russia-China Negotiations

The primary sticking point has been price.

China wants Gazprom to sell gas at a price comparable to the domestic price, roughly US$60 per 1000 cubic meters. That’s roughly one-quarter of what China pays under the Power of Siberia 1 agreement, which delivers gas at $260 per 1,000 cubic meters.

Country	Russian export price per thousand cubic meters in 2024 (average) (in US dollars)
Domestic pricing	$60
European Union	$320.3
China	$257
Türkiye	$320.3
Belarus	$127.52
Uzbekistan	$160
Kazakhstan	$180
Kyrgyzstan	$150

Source: OrfOnline

Another issue is that although gas from Russia is the cheapest, China continues to import gas from Turkmenistan in Central Asia through the Central Asia-China pipeline. With the construction of the fourth line of the Central Asia-China pipeline, known as line D, a further 30 BCM of gas to China would be exported, bringing Turkmen gas imports to China to 85 BCM. Also, China imports LNG from Qatar, the UAE, the United States and other suppliers.

Furthermore, China has other concerns, such as Gazprom seeking to control the Mongolian section of the pipeline, which it fears will increase Russia’s influence in Mongolia.

The future of the Power of Siberia 2 pipeline remains uncertain, with negotiations ongoing and several complex issues yet to be resolved by Russia and China.

Gas

Kwale Gas Gathering to Double its Gas Processing Capacity

Published

1 week ago

May 28, 2025

nigeriaoildigest

The Kwale Gas Gathering (KGG) plant is set to undergo expansion to reach 600 million standard cubic feet daily

The Kwale Gas Gathering (KGG) plant plans to undergo expansion to reach 600 million standard cubic feet daily. KGG facility was designed to process stranded gas resources in OML56.

The KGG project earned Nigeria the Regional Gas Award for Africa by the International Gas Union (IGU) at the 29th World Gas Conference, held in Beijing, China, from May 19 to 23, 2025.

The 29th World Gas Conference was an exclusive gathering of the global gas and energy industry hosted by the International Gas Union.

The IGU represents over 90% of the global natural gas production and consumption market.

Kwale Gas Gathering Current Operations and Strategic Importance

Current Capacity: The KGG facility boasts a processing capacity of 300 million standard cubic feet per day of natural gas.
Location: Umusam community, near Kwale, Delta State
Developers: Nedogas Development Company Limited, a Joint Venture between Xenergi Limited and the Nigerian Content Development and Monitoring Board.

Commissioned on June 6, 2024, the KGG facility serves as a hub for gathering, compressing, injecting, and metering natural gas from various fields in OML 56. Thus, KGG facilitates the monetization of stranded gas resources.

Additionally, the KGG hub will connect to the 48-inch OB-3 gas trunk line. NNPC owns and operate the trunk line.

The facility began operations with an initial gas injection capacity of roughly 50 MMscfd. This comprises 20 MMscfd from the Nedogas Plant and an additional 30 MMscfd from the Matsogo field, operated by Chorus Energy Limited.

Economic Benefit

The KGG facility is projected to contribute over $240 million per annum to Nigeria’s GDP within the next four years.

This contribution will occur through trunk line tariffs, gas sales to off-takers, and other infrastructure tariffs and tolling revenues generated by the network and trunk line operators.

Additionally, it will contribute to the development of the Delta State Economic Zone.

The KGG facility aligns with the federal government’s “Decade of Gas“ initiative. The Decade of Initiative aims to increase gas production and utilization nationwide for power generation and as a feedstock for industries.

Plans are underway to expand the KGG facility’s capacity to 600 million scf/d in the second phase. The aim is to accommodate the increasing gas volumes from nearby fields.

First Hydrocarbon Nigeria (FHN), Pillar Oil, and Midwestern Oil & Gas operate these fields.

Gas

Natural Gas Prices May 27, 2025: US, UK & Europe

Published

1 week ago

May 28, 2025

nigeriaoildigest

Get the latest gas price data for May 27, 2025 including US, UK & Europe prices, and factors influencing gas prices

Gas prices surged in the US and the UK, but held steady in Continental Europe on May 27, 2025, amid growing concerns over supply disruptions.

Prices remain after unplanned capacity cuts were announced at Norway’s massive Troll gas field due to external power issues, compounding ongoing maintenance at other key sites like Nyhamna and Aasta Hansteen.

Norway is under pressure to maintain stable flows as Europe scrambles to refill gas storage, currently at just 45%.

The US natural gas price closed at roughly $3.753/MMBtu on May 27, compared with 3.667/MMBtu recorded on May 27.

UK natural gas futures topped to 88.46 pence per therm up from 87.15 recorded on May 26.

European natural gas futures topped €37.00/MWh on May 27, down from €37.25/MWh recorded on May 26.

Read: Natural Gas Prices May 26, 2025: US, UK & Europe

Major Natural Gas Price Benchmarks

Region	Benchmark	Key Features
United States	Henry Hub (NYMEX)	Reflects supply/demand in North America Tied to US shale gas production & pipeline infrastructure dynamics
Europe	TTF (Netherlands)	Europe's leading gas benchmark Reflects LNG and pipeline flows from Russia, Norway, and LNG imports
Asia	JKM (Japan-Korea LNG)	Reflects Asian demand, LNG deliveries to Japan & South Korea
United Kingdom	NBP (National Balance Point)	Linked to European gas markets Influenced by LNG & North Sea supply Futures

Other benchmarks include

Oil-Linked Pricing: Some long-term contracts ( Russia’s Gazprom pipeline gas exports) still use oil-indexed pricing. Gazprom has long preferred long-term contracts and hybrid pricing with spot elements to hedge against price volatility.
AECO Canada: It is Canada’s benchmark linked to Western Canada’s pipeline gas supply

Key Factors Influencing Natural Gas Prices

Several supply and demand factors influence natural gas prices. Below is a detailed breakdown of key aspects affecting natural gas prices:

Supply Factors

Production Levels: Qatar, Russia, and US shale gas production heavily influence global supply. Thanks to fracking technology, the US is already the world’s top natural gas producer. Thus, higher gas production by these countries can push prices down due to oversupply.
Storage Inventories: Natural gas is stored in underground facilities. Thus, high storage levels generally lead to lower prices. At the same time, low storage levels signal scarcity, leading to price surges.
Imports/Exports: Fluctuations in gas exports via pipelines or LNG from key producers can significantly affect regional prices. For instance, European gas prices soared by 30% in September 2022 following the indefinite shutdown of Russia’s Nord Stream 1 pipeline. The pipeline, which runs under the Baltic Sea to Germany, historically supplied between 50 – 55 BCM/year of gas to Europe. Likewise, rising liquefied natural gas (LNG) exports by Qatar, Australia, and the US can lead to oversupply and lower prices.

Demand

Electricity Sector Competition: Countries rely on various sources for power generation, including natural gas, nuclear power, coal, and renewable energy like wind and solar. Suppose the prices of coal and renewables increase. In such developments, electricity producers will shift to natural gas. Conversely, if coal or renewable sources become cheaper, demand for gas will fall, resulting in lower gas prices.
Weather conditions: Weather plays a significant role in influencing natural gas prices. During the summer, there is a massive surge in the demand, especially in Europe & North America, for air conditioning systems. The high demand for electricity to cool homes and industrial plants can increase natural gas prices. At the same time, during the cold winter season, there is increased gas demand, especially across Europe, North America, and East Asia, to heat homes and industries. When chilly weather hits—like snowstorms or Arctic blasts—it can freeze up gas wells. That means less output, slower deliveries, and higher prices. Hurricanes often shut down oil and gas operations temporarily, pushing prices higher.
Economic Growth: Strong global economic growth, especially in the US, China, Japan, South Korea, and the EU, boosts industrial demand for natural gas. The manufacturing sector (chemicals, automotive, petrochemicals) depends heavily on gas for feedstock and power generation. However, a weak global economic outlook reduces gas demand, and thus, prices drop.

Geopolitics

Geopolitical tensions, such as the 2023-2025 Middle East Crisis and the 2022-2025 Russia-Ukraine war, negatively impact gas prices. These tensions disrupt pipeline gas or LNG supplies from producing countries (Russia, Qatar, Australia) to Europe, causing price spikes.
- Russia-Ukraine War: Sanctions on Russian gas disrupted gas supplies to Europe, causing price surges.
- Middle East Conflicts: The tensions in the Middle East impact LNG exporters like Qatar. Following the Houthi Rebel attacks on commercial shipping passing along the Red Sea, Qatar has detoured its LNG tankers towards the Cape of Good Hope (Southern Africa), a much longer route to export LNG to its European clients.

Gas

Natural Gas Prices May 26, 2025: US, UK & Europe

Published

2 weeks ago

May 27, 2025

nigeriaoildigest

Get the latest gas price data for May 26, 2025 including US, UK & Europe prices, and factors influencing gas prices

Gas prices saw mixed reactions in the US, the UK & Continental Europe on May 26, 2025, amid growing concerns over supply disruptions.

Prices rose in Europe after unplanned capacity cuts were announced at Norway’s massive Troll gas field due to external power issues, compounding ongoing maintenance at other key sites like Nyhamna and Aasta Hansteen.

Equinor extended a partial outage at Troll until May 30 following a compressor failure. The outage, which began after the field’s annual one-day stop-start test on May 21, has affected output by 34.6 million cubic meters per day, leaving Troll’s remaining capacity at 90 mcm/d.

Norway is under pressure to maintain stable flows as the continent scrambles to refill gas storage, currently at just 45%. Geopolitical tensions also weigh on sentiment, particularly as hopes for a Ukraine peace deal continue to fade.

The US natural gas price closed at roughly $3.66/MMBtu on May 26, compared with 3.75/MMBtu recorded on May 25.

UK natural gas futures held steady at 87.15 pence per therm.

European natural gas futures topped €37.25/MWh on May 26, up from €36.45/MWh recorded on May 23.

Read: Natural Gas Prices May 20, 2025: US, UK & Europe

Major Natural Gas Price Benchmarks

Region	Benchmark	Key Features
United States	Henry Hub (NYMEX)	Reflects supply/demand in North America Tied to US shale gas production & pipeline infrastructure dynamics
Europe	TTF (Netherlands)	Europe's leading gas benchmark Reflects LNG and pipeline flows from Russia, Norway, and LNG imports
Asia	JKM (Japan-Korea LNG)	Reflects Asian demand, LNG deliveries to Japan & South Korea
United Kingdom	NBP (National Balance Point)	Linked to European gas markets Influenced by LNG & North Sea supply Futures

Other benchmarks include

Oil-Linked Pricing: Some long-term contracts ( Russia’s Gazprom pipeline gas exports) still use oil-indexed pricing. Gazprom has long preferred long-term contracts and hybrid pricing with spot elements to hedge against price volatility.
AECO Canada: It is Canada’s benchmark linked to Western Canada’s pipeline gas supply

Key Factors Influencing Natural Gas Prices

Several supply and demand factors influence natural gas prices. Below is a detailed breakdown of key aspects affecting natural gas prices:

Supply Factors

Production Levels: Qatar, Russia, and US shale gas production heavily influence global supply. Thanks to fracking technology, the US is already the world’s top natural gas producer. Thus, higher gas production by these countries can push prices down due to oversupply.
Storage Inventories: Natural gas is stored in underground facilities. Thus, high storage levels generally lead to lower prices. At the same time, low storage levels signal scarcity, leading to price surges.
Imports/Exports: Fluctuations in gas exports via pipelines or LNG from key producers can significantly affect regional prices. For instance, European gas prices soared by 30% in September 2022 following the indefinite shutdown of Russia’s Nord Stream 1 pipeline. The pipeline, which runs under the Baltic Sea to Germany, historically supplied between 50 – 55 BCM/year of gas to Europe. Likewise, rising liquefied natural gas (LNG) exports by Qatar, Australia, and the US can lead to oversupply and lower prices.

Demand

Electricity Sector Competition: Countries rely on various sources for power generation, including natural gas, nuclear power, coal, and renewable energy like wind and solar. Suppose the prices of coal and renewables increase. In such developments, electricity producers will shift to natural gas. Conversely, if coal or renewable sources become cheaper, demand for gas will fall, resulting in lower gas prices.
Weather conditions: Weather plays a significant role in influencing natural gas prices. During the summer, there is a massive surge in the demand, especially in Europe & North America, for air conditioning systems. The high demand for electricity to cool homes and industrial plants can increase natural gas prices. At the same time, during the cold winter season, there is increased gas demand, especially across Europe, North America, and East Asia, to heat homes and industries. When chilly weather hits—like snowstorms or Arctic blasts—it can freeze up gas wells. That means less output, slower deliveries, and higher prices. Hurricanes often shut down oil and gas operations temporarily, pushing prices higher.
Economic Growth: Strong global economic growth, especially in the US, China, Japan, South Korea, and the EU, boosts industrial demand for natural gas. The manufacturing sector (chemicals, automotive, petrochemicals) depends heavily on gas for feedstock and power generation. However, a weak global economic outlook reduces gas demand, and thus, prices drop.

Geopolitics

Geopolitical tensions, such as the 2023-2025 Middle East Crisis and the 2022-2025 Russia-Ukraine war, negatively impact gas prices. These tensions disrupt pipeline gas or LNG supplies from producing countries (Russia, Qatar, Australia) to Europe, causing price spikes.
- Russia-Ukraine War: Sanctions on Russian gas disrupted gas supplies to Europe, causing price surges.
- Middle East Conflicts: The tensions in the Middle East impact LNG exporters like Qatar. Following the Houthi Rebel attacks on commercial shipping passing along the Red Sea, Qatar has detoured its LNG tankers towards the Cape of Good Hope (Southern Africa), a much longer route to export LNG to its European clients.

Gas

Shell Nigeria Gas Engages Stakeholders On Deepening Gas Distribution

Published

2 weeks ago

May 25, 2025

nigeriaoildigest

Shell Nigeria Gas hosted a forum in Ogun State to boost gas distribution, support industries, and power Nigeria’s energy future

Shell Nigeria Gas (SNG) engaged more than 100 gas off-takers in the Agbara Ota industrial zone in Ogun State. Shell Nigeria Gas’ engagement is part of its efforts to deepen gas distribution for power generation by industries and other businesses.

SNG assembled over 100 gas off-takers, including industry partners and government representatives. They discussed strategies for gas supply to industries and businesses.

It interacted with the off-takers in customer forums to receive feedback and explore ways of improving gas supply.

Strengthening Stakeholder Collaboration

Shell Nigeria Gas organized a forum titled “The Natural Gas Partner of Choice, Powering Nigeria.”

Officials from the federal government, Ogun State government, NNPC, and the Manufacturers Association of Nigeria attended the forum.

According to Shell Energy Nigeria’s General Manager, Markus Hector, “Shell’s commitment is to build, operate and maintain a gas distribution system that is reliable, resilient, transparent, and growth-oriented, to support businesses, industries and ambitions.”

Background: Shell Nigeria Gas

Shell Nigeria established Shell Nigeria Gas Limited in 1998. This subsidiary develops, operates, and maintains gas distribution infrastructure and delivers gas to industrial and commercial customers across Nigeria.

As such, it operates over 150 kilometers of pipeline infrastructure, supplying natural gas to more than 100 manufacturing and power generation customers in key industrial zones such as:

Ogun State (notably the Agbara-Ota industrial cluster)
Rivers State
Abia State

In March 2024, SNG signed a $100 million agreement with Oyo State to develop a gas supply and distribution network for industrial and commercial users across the state.

Under the 20-year deal, SNG will construct and operate the pipeline network, which is expected to deliver up to 60 million standard cubic feet of gas daily.

Consequently, the project will begin with a 15-kilometer pipeline and is expected to bring its first gas flow in Q4-2025.

Customer / Project	Sector	Location	Details
Brass Fertilizer and Petrochemical Co.	Petrochemicals	Bayelsa State	To receive 270 million scf/day of gas for a $3.5 billion fertilizer plant
Industrial Clusters in Oyo State	Manufacturing & Power	Ibadan, Lagos-Ibadan Axis	Up to 60 million scf/day to be delivered via a 15-km gas pipeline
CNG Companies (various)	Energy / Distribution	Multiple locations in Nigeria	SNG supplies bulk gas for further distribution via trucks
Industrial Clients in Agbara-Ota Area	Manufacturing	Ogun State	Includes food processing, pharmaceuticals, packaging, etc
Aba Cluster Clients	Manufacturing & Power	Abia State	Cluster of SMEs and large industries supported by direct gas supply
Port Harcourt Cluster Clients	Industrial & Commercial	Rivers State	Industries using gas for power generation and processing needs

Alignment with the “Decade of Gas” Initiative

In March 2021, the federal government established the “Decade of Gas.” This government initiative aims to harness the country’s vast gas reserves to drive economic growth and development.

Under the plan, the government will ramp up gas use in the decade from 2020 to 2030 in partnership with other stakeholders.

Shell Nigeria Gas supports the government’s Decade of Gas initiative through:

Expansion into Oyo State to supply gas to industries in the State.
Ongoing engagement with its key customers and partners to deepen gas distribution.

The Special Adviser to the President on Energy, represented by the Team Lead, Gas, Lateef Biobaku, shared the government’s vision for the oil and gas industry. He stated, “Our vision is to unlock Nigeria’s energy potential, to help fuel economic growth, to drive industrialization, and to help diversify our economy. The aim is to attract investments to help raise oil and gas production to 4 million barrels per day and 12 billion cubic feet of gas per day by 2030.”