Putin, Xi launch ‘historic’ Russian gas pipeline to China

An employee checks a gas valve at a compressor station, a part of Gazprom’s Power Of Siberia gas pipeline, outside the far eastern town of Svobodny, Russia. (Reuters)
Updated 02 December 2019

Putin, Xi launch ‘historic’ Russian gas pipeline to China

  • The project is aimed at cementing Moscow’s role as the world’s top gas exporter

MOSCOW: Russia and China on Monday launched a giant gas pipeline linking the countries for the first time, one of three major projects aimed at cementing Moscow’s role as the world’s top gas exporter.

Presiding by video linkup over an elaborate televised ceremony, Russian leader Vladimir Putin and Chinese counterpart Xi Jinping hailed the “Power of Siberia” pipeline as a symbol of cooperation.

“Today is remarkable, a truly historic event not only for the global energy market, but first of all for us and for you, for Russia and China,” Putin said.

Xi said the project served as a model of cooperation.

“China-Russia relations are entering a new era,” Xi said. “Everyone worked hard.”The ceremony featured hard-hatted gas workers and videos showing the pipeline’s difficult path from remote areas of eastern Siberia to Blagoveshchensk on the Chinese border.

Workers burst into applause and celebratory music played as the CEO of Russian gas giant Gazprom, Alexei Miller, speaking from the Amur region, ordered a valve opened for the gas to flow across the border.

The 3,000-km pipeline — which Putin has called “the world’s biggest construction project” — will supply China with 38 billion cubic meters of gas annually when fully operational in 2025.

Russia and China signed the 30-year, $400 billion construction deal in 2014 — Gazprom’s biggest ever contract.

The pipeline is part of Russia efforts to develop ties with Asia — in particular top energy importer China — amid longstanding tensions with the West.

Gazprom stressed that the pipeline ran through “swampy, mountainous, seismically active, permafrost and rocky areas with extreme environmental conditions.”

Temperatures along the route plunge to below -60 C in Yakutia and below -40 C in the Russian Far East’s Amur Region.

Work has also been completed on the first road bridge between Russia and China, further linking the two neighbors.

The bridge, which is to open next year, will connect the city of Blagoveshchensk and the northern Chinese city of Heihe.

Moscow, however, remains a key gas provider to Europe and is also planning to soon launch two more pipelines that will ramp up supplies to the continent while bypassing Ukraine — TurkStream and Nord Stream 2.

Analysts said the three projects have long-term economic and political benefits for Russia, which has inserted itself between European markets to the west and the rapidly growing Chinese market to the east.

“Russia is not only creating new income streams, but hedging its bets and bolstering its position strategically,” said energy analyst Andrew Hill.

“The ability to play one off against the other will not have been lost on either Gazprom or the Kremlin,” Hill, who leads the S&P Global Platts EMEA gas and power analytics team, wrote in a blog.


Oil-rich wealth funds seen shedding up to $225 billion in stocks

Updated 30 March 2020

Oil-rich wealth funds seen shedding up to $225 billion in stocks

  • Risking more losses is not an option for some funds from oil-producing nations

LONDON: Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are on course to dump up to $225 billion in equities, a senior banker estimates, as plummeting oil prices and the coronavirus pandemic hit state finances.

The rapid spread of the virus has ravaged the global economy, sending markets into a tailspin and costing both oil and non-oil based sovereign wealth funds around $1 trillion in equity losses, according to JPMorgan strategist Nikolaos Panigirtzoglou.

His estimates are based on data from sovereign wealth funds and figures from the Sovereign Wealth Fund Institute, a research group.

Sticking with equity investments and risking more losses is not an option for some funds from oil-producing nations. Their governments are facing a financial double-whammy — falling revenues due to the spiraling oil price and rocketing spending as administrations rush out emergency budgets.

Around $100-$150 billion in stocks have likely been offloaded by oil-producer sovereign wealth funds, excluding Norway’s fund, in recent weeks, Panigirtzoglou said, and a further $50-$75 billion will likely be sold in the coming months.

“It makes sense for sovereign funds to frontload their selling, as you don’t want to be selling your assets at a later stage when it is more likely to have distressed valuations,” he said.

Most oil-based funds are required to keep substantial cash-buffers in place in case a collapse in oil prices triggers a request from the government for funding.

A source at an oil-based sovereign fund said it had been gradually raising its liquidity position since oil prices began drifting lower from their most recent peak above $70 a barrel in October 2018.

In addition to the cash reserves, additional liquidity was typically drawn firstly from short-term money market instruments like treasury bills and then from passively invested equity as a last resort, the source said.

It’s generally a similar trend for other funds.

“Our investor flows broadly show more resilience than market pricing would suggest,” said Elliot Hentov, head of policy research at State Street Global Advisers. “There has been a shift toward cash since the crisis started, but it’s not a panic move but rather gradual.”

The sovereign fund source said the fund had made adjustments to its actively managed equity investments due to the market rout, both to stem losses and position for the recovery, when it comes.

Exactly how much sovereign wealth funds invest and with whom remain undisclosed. Many don’t even report the value of the assets they manage.

On Thursday, the Norwegian sovereign wealth fund said it had lost $124 billion so far this year as equity markets sunk but its outgoing CEO Yngve Slyngstad said it would, at some point, start buying stocks to get its portfolio back to its target equity allocation of 70 percent from 65 percent currently.

Slyngstad also said that any fiscal spending by the government this year would be financed by selling bonds in its portfolio.