2025-09-09 Corbeau-Downs-Mitrova transcript Tatiana Mitrova: After reviewing all the sanctions that were imposed after listening to all the commercial deals that were proposed, Russia is signaling we are not interested, we prefer to stay on the China side.

Anne-Sophie Corbeau: There are many people in China really wondering whether this is a wise move because you are becoming more and more dependent on one single country and in particular on Russian pipeline gas.

Erica Downs: The MOU is a relatively cost-free way and that China hasn't actually committed to buy anything yet to signal to the United States that China and Russia cannot be split.

Jason Bordoff: Before it invaded Ukraine, Russia was Europe's single largest supplier of imported natural gas.

But now the European Union is considering an outright ban on all Russian gas by the end of 2027, and Russia is pivoting to Asia.

It’s courting China both as a crucial new market for its gas and also as an important geostrategic ally.

When Russian President Vladimir Putin traveled to China at the end of August, the visit produced a series of cooperation agreements.

Among them: a deal between Gazprom and the China National Petroleum Corporation to advance the long-discussed Power of Siberia 2 pipeline, a massive project that, if completed, could send 50 billion cubic meters of Russian natural gas to China each year.

But despite the announcement, many key questions remain unanswered, from pricing, to financing, to when, or even whether, the pipeline will actually be built.

So what does this deal actually deliver for both Russia and China in the short term – beyond symbolism?

What prompted China to sign the agreement after years of delays?

And what does it tell us about China's efforts to diversify its energy imports?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University.

I’m Jason Bordoff.

Today on the show, three of our very own scholars here at the Center: Anne-Sophie Corbeau, Tatiana Mitrova, and Erica Downs.

Anne-Sophie is a global research scholar at the Center on Global Energy Policy, where she focuses on hydrogen and natural gas.

She previously worked as a senior analyst at BP and the International Energy Agency.

Tatiana is a research fellow at the Center on Global Energy Policy.

She has twenty five years of experience dealing with Russian and global energy markets.

And Erica is a senior research scholar here at the Center, where she focuses on Chinese energy markets and geopolitics.

Earlier in her career she held senior roles in the China Studies program of the CNA Corporation and at Eurasia Group.

Anne-Sophie, Tatiana, and Erica joined me to discuss the PoS2 deal, which they’ve also recently explored in a post on the CGEP site, which we’ll link to in the show notes.

We talked about this agreement’s geopolitical significance, how it might impact China’s energy security and strategy, and the possible implications for the global gas market.

I hope you enjoy our conversation.

Anne-Sophie Corbeau, Erica Downs, Tatiana Mitrova, phenomenal colleagues, all of you.

Thanks for being with us to discuss what's happening in global gas markets, geopolitics and particularly the potential announcement between Russia and China.

Anne-Sophie, let me start with you.

I was interested in talking to you, all three of you because at various times over several years you have written really thoughtfully about the dynamics in the global gas market and particularly how they connect to geopolitical events, Russia cutting off gas supply, most gas supplies to Europe, pipeline gas supplies.

And there's been a lot of discussion for many years about closer ties between Russia and China and you've written about that in the past.

And so let's just start with an announcement that maybe is significant, although I think people are still trying to understand exactly what was announced and how real it is about this massive natural gas pipeline called Power of Siberia 2 between Russia and China.

Just for people listening, what is that project?

What's the scale of it, what's it all about?

Give people the background and then what was announced this week and then Tati and Erica would love to have you add to that.

Anne-Sophie Corbeau: Yes, thank you very much.

And just to give the people a little bit of context.

So right now there is one pipeline which is linking Russia to China.

It's called Power of Siberia One, it's currently running at capacity, it's 38 billion cubic meters, so it's relatively big pipeline.

In February, 2022, another smaller pipeline was announced, which is called Eastern Route and it's going to be 10 BCM.

It was planned to be 10 billion cubic meters.

And then we have another project which is called Power of Siberia 2.

The big difference between Power of Siberia One and Power of Siberia 2 beside the size.

So Power of Siberia 2 is going to be 50 billion cubic meters.

So even larger is that the Power of Siberia One was actually using fields which were in the eastern part of Russia where the Power of Siberia 2 can actually use fields which are closer to the Yamal Peninsula.

And it basically relates to a whole idea of Russia, which dates from many, many years ago of pivoting to Asia.

But initially when this strategy of pivoting to Asia was designed, it was to basically make sure that Russia was diversifying a little bit away from Europe.

But now that Russia has almost lost entirely the European market, that is the European Union, it's more like replacing that market.

So the announcement which was made this week on not only Power of Siberia but on the three pipelines was that Power of Siberia One was going to be increased.

So from 38 BCM to 44 BCMs, the eastern route was going to be increased from 10 to 12 billion cubic meters.

And then the Power of Siberia 2 would be 50 billion cubic meters.

The thing is that while there has been this announcement, there is actually nothing concrete on either the pricing, the volumes, the timelines.

So we don't have a gas sales agreement, which is the reason why I think a certain number of people have been saying, well okay, there is this announcement but it's not really totally concrete.

We don't know when it's going to come.

However, I think we all agreed that and Erica and myself, that this is a big geopolitical sign which is given by Russia and China towards the entire world and in particular to the United States.

Jason Bordoff: So Tatiana, maybe you can pick up on that.

I was going to sort of ask you, and for people listening who may not be familiar with this project, if we pull up some of them hanging in my office, if you pull up maps of oil and gas pipelines across Europe, across Asia, there's no lack of pipelines, there's a lot of pipelines.

So why are we talking about this particular pipeline, the possibility that it might now advance, why is it significant geopolitically and then it might be significant as well for energy markets for natural gas markets and prices, we'll come to that in a minute, but why is this a consequential thing that we should be sitting here talking about?

Tatiana Mitrova: So first of all Jason and I want to make a little bit of historical remark to give the context.

Power of Siberia 1 was announced in 2014 right after Russia's annexation of Crimea and by that time frankly it was not making a lot of economic sense for Gazprom because the prices that China was providing were much lower than the European market.

Nevertheless, Russia made this move signaling to the rest of the world that we are not that dependent on the west, that we have other friends in the east.

So with Power of Siberia 2, which is an even bigger pipeline, it's 50 billion cubic meters.

So it's comparable to Nord Stream pipeline.

It is the next step in this pivoting to the East.

And if we put it also in the whole context of what has been happening during the last six months between Russia, Europe, US, it is also a very strong signal that after reviewing all the sanctions that were imposed after listening to all the commercial deals that were proposed, including those discussed in Anchorage during the US Russia summit, Russia is signaling we are not interested, we choose the other partner, we prefer to stay on the China side.

And this is more of a symbolic gesture because as Anne-Sophie mentioned on the commercial side there is nothing, I mean this binding memorandum as Russian officials call it, it's just an obligation binding obligation to keep negotiations.

It's not a commercial obligation.

It doesn't settle the prices, it doesn't define the take or pay volumes.

It doesn't describe who is financing the pipeline, but it is given in a very specific moment of these Shanghai Cooperation Organization Summit when it's not only Russia and China but also India joining their forces and starting to speak in one voice claiming that they want a new global economic order, political order, and potentially energy order.

So this pipeline is much more a geopolitical symbol rather than a commercial enterprise.

And what we are arguing that even if this pipeline will never happen, even if it will not be built, it is already affecting geopolitics on one hand.

And on the other hand, it is affecting the perception of the global gas market.

It is changing the whole map and the rationale for decision makers for those producers who are developing their new LNG projects and seeking for FIDs.

Now when they go to their banks, it'll be much more difficult to secure financing because the market starts to shrink.

At least this is the perception.

Jason Bordoff: So obviously all those details would matter a lot the price, the term duration take or pay.

But you're saying even regardless of those things, if I understand you correctly from Russia's standpoint, we'll come to China's in a minute.

It is geopolitically significant, I don't want to put words in your mouth, but we've had this historic important significant meeting between Putin and Trump in Alaska efforts by Trump seemingly to try to put pressure for some ceasefire or resolution threats of tariffs against India for continuing to buy Russian oil bills in Congress to sanction Russian oil.

And a perception maybe that Russia sort of shot itself in the foot by giving up the European market when it cut off gas supply.

Ann’So do I hear you saying, tell me if I hear it right, this is sort of Putin signaling, you know what we can do without all of you and we have a lot of other partners we can work with around the world.

We don't need the European market.

We might not even need the US may not even have as much influence or leverage as it thinks.

Is that sort of reading too much into it or is that how you think what the signal Putin was trying to send?

Tatiana Mitrova: Exactly.

That's my understanding of the situation.

I don't think frankly that he's completely closing the window.

There is still some room for further negotiations.

It can be a bargaining chip so that he will later on discuss again with the US officials and probably claim for more concessions for faster sanctions relief for more financing from the US.

Could be.

But anyway, he made this step which was unimaginable even several years ago because clearly Russia will pay a huge price for that.

It is well known that Russian officials domestically, they are presenting this project as a huge success.

Everyone understands that the prices will be even lower than prices for Power of Siberia 1.

Most likely Gazprom will have to finance it on its own.

And Gazprom's financial situation today is far worse compared to 2014.

So it will be difficult.

It'll not generate profits.

I hope it will avoid loss making, but it's not a luxury project.

Anyway, Russia is ready to pay this price in order to have this geopolitical bargaining tool.

And if bargaining with the US completely fails, it will at least secure strategic partnership with China.

Jason Bordoff: Erica, let me come to you in one second, but Anne-Sophie , you wanted to add something to that?

Anne-Sophie Corbeau: Yes, because you were mentioning the Alaska Summit and I think one very fun fact is that precisely during the moment when President Putin and President Trump were meeting the sanctioned cargo from Arctic LNG 2 actually started to move and one of them arrived late August to China.

And that I think is a fantastic sign of both Russia and China testing the new US administration because the previous administration was hell-bent on making sure that that project will actually never move ahead, never actually be able to reach any single buyer.

And this is Jason Bordoff: A major Russian LNG export project just for people.

Absolutely.

Anne-Sophie Corbeau: For US listeners, I mean this is as big as a project.

So this is 27 billion cubic meters.

This is a very big project.

One train is sort of operational.

We are trying to start the third one and last year they tried to basically send some LNG cargoes.

They involved a dark fleet of LNG cargoes, they managed to load eight cargoes.

These eight cargoes never reached destination.

And this year they have started again loading cargoes and one cargo reached China and that I think is a very important signal that both the China and Russia are testing the new US administration to see whether well the sanctions matter or not.

And so far what have we heard?

Nothing.

Absolutely nothing.This is a direct competition to the US LNG and LNG dominance and we are letting this project moving forward and arriving to China and honestly if more cargos are coming to China, I am pretty sure that India is going to be following and importing LNG cargo from that project as well.

Jason Bordoff: Erica, share with us how you're thinking about the thinking in Beijing and what this means for China.

When I look at China's energy import policy, oil, gas, I've always had the perception that it tries to, it exemplifies Winston Churchill's famous dictum.

Security lies in variety and variety alone.

Diversification.

China never seems to want to get more than 15 or 20% of its oil supply from any one source, that sort of thing.

So the LNG market does a decent job of that.

You can bring LNG supplies in from a lot of places.

Sources are diversified if there's a disruption somewhere you can get cargoes from somewhere else.

This seems to go in the other direction, a major infrastructure project connecting two countries point A and point B, there's not a lot of ability to go elsewhere.

So what's going on with China?

Erica Downs: So I do agree with that.

A longstanding characteristic of China's approach to supply security has been to not become too reliant on a single country or a single import route.

But if we look at Power of Siberia 2 and if this pipeline is built and if China takes delivery of the full 50 billion cubic meters per year, then by my back-of-the-envelope calculation, China could be depending on Russia for 40 to 45% of its natural gas imports in 2040.

Jason Bordoff: Natural gas, sorry, just to be clear, imports or consumption Erica Downs: Imports, the number I see floating around for consumption is 20%, but still a high number for a single country.

And because of this, I suspect that when China and Russia start to negotiate volumes that China is likely to push for flexibility so that it can take lower less than 50 BCM per year to avoid that level of dependence and then just have that extra gas in reserve.

And I also wanted to share a few other thoughts on the project.

When I first saw the news that China and Russia had signed this legally binding memorandum, I started thinking about why is this happening now?

Because as you know over the past few years, many summit meeting between Putin and Xi has come and gone with nothing being signed on Power of Siberia 2, the fact that this has been routinely at the top of Putin's wishlist for things he would like China to deliver.

So why is this happening now?

Over the past year Russia has demonstrated that it's a very reliable supplier of pipeline gas to China.

We've seen Power of Siberia 1 ramp up to its full capacity of 38 BCM per year.

In contrast, there have been some developments that I think raise questions about the reliability of China's LNG deliveries from some of the world's largest LNG exporters.

One of those countries of course is the United States with the launch of the second US China trade war, we have once again seen China's imports of US LNG plunged to zero.

And the conflict between Iran and Israel over the summer had lots of people raising questions about the security of energy flows through the Strait of Hormuz and China imports almost 30% of its LNG from Qatar and that gas flows through the Strait of Hormuz.

So one idea, one thought that I had is that these developments that have raised questions about the security of some of LNG supplies make Power of Siberia 2 look more attractive.

A second reason which Anne-Sophie had alluded to is that this sends a signal to the United States that China may not need as much LNG from the United States as a lot of people previously thought that it would.

A third reason is that the MOU is a relatively cost-free way and that China hasn't actually committed to buy anything yet to signal to the United States that China and Russia cannot be split.

There has been an interest in the current administration in trying to draw Russia closer to the United States to balance against China.

That idea hasn't gone over very well in Beijing, which has said that we can't be split.

And what better way to reinforce that point than to sign an agreement to build yet another big piece of infrastructure that physically connects the two countries.

And then finally the last thing I was thinking about was the fact that this agreement, this memorandum for Power of Siberia 2 was signed immediately after the conclusion of the Shanghai Cooperation Organization summit that was held in China.

One of the things that happened at the SCO summit is that we did see China unveiling supporting some initiatives that indicate it would like to reshape the international political and economic order and by signing this agreement or this memorandum for Power of Siberia 2, I think they're also indicating that they are willing to reshape global gas markets.

Jason Bordoff: Ann’So I'd love to hear you comment on that thinking.

I understand that if you're sitting in Beijing and you're a big gas importer and you're looking at conflict recently in the Middle East and saying, well it looked like there were threats to the Strait of Hormuz and what does that mean for Qatari LNG?

Or we thought we could rely on US LNG and Trump seems to be using different tools of coercion to extract concessions.

Maybe LNG becomes one of those, maybe Democrats come in and restrict LNG over climate change concerns, but you don't want to, I assume a multi-billion dollar multi-decade infrastructure project because of a moment in time.

And you could imagine Europe, if we went back to 2020 and the many decades before throughout the Cold War, most people in Europe said Russia had never weaponized energy all through the Cold War and it was a reliable supplier and then things can change quickly.

So the idea of being dependent on diversified global LNG market with Australia, with Malaysia, there was a bunch of not that many as oil, but there's a lot of suppliers versus we're going to double down on our dependence from one country that has uncertain track record of how they think about being a reliable supplier of energy exports.

Does that make sense to you?

Do you think that's what's going on right now?

Anne-Sophie Corbeau: You are right.

I mean this is an interesting position and I think this is the reason why there are many people in China are really wondering whether this is a wise move because indeed, I mean as Erica mentioned, suddenly you will be importing a little bit more than 100 BCM of Russian pipeline gas plus let's say 20-30 BCM of Russian LNG.

So you are becoming more and more dependent on one single country and in particular on Russian pipeline gas.

I mean Russian LNG, if you assume that basically the LNG is fungible, you could always replace that by LNG coming from other countries.

But the pipeline gas is indeed a big issue.

But I mean you can also turn the question from the other direction.

I mean given that Russia has already lost the European market, do they also want to lose the China market?

Because I mean suddenly you would be really annoying a country which has had economic ties between Russia and China.

So I mean that could be a very, very politically economically complicated move.

And let's not forget that it's not only about gas, it'll be also about oil.

So is it really something that Putin would want to do?

I am not so sure.

Jason Bordoff: Tatiana, let me ask you about that.

I presume part of the answer from the perspective of Beijing is informed by how people in Moscow are thinking about it.

If Anne-Sophie is right that you lost a lot of the European market, at least for now and maybe for a while, I don't know if that's forever and you want to lock in this other market, you might think Beijing has the negotiating leverage.

And I'm wondering if part of the answer to my own question is it depends on the terms if Russia, if China gets a really cheap price for the gas and flexibility and when it needs to receive supply and when it doesn't, then maybe it's an option, it's not sort of locking yourself into significant dependence.

Is that part of what's going on here?

It really depends what the terms end up being if and when this ever gets done.

Tatiana Mitrova: Yeah, absolutely Jason And the signals that I am receiving from Moscow, not from the officials but from the expert circles, they suggest that China is demanding very low prices lower than Power of Siberia 1 which is already the lowest priced gas that China is importing today closer to the Russian domestic tariff level, which is like $3.50 per million btu.

So it's really cheap.

And in addition to that very low take or pay volumes, instead of normal 80% they are talking about 50%, which will mean 25 billion cubic meters instead of 50 billion cubic meters, which provides China with enormous flexibility and at the same time keeps Russia very much dependent on each and every China's decision.

And here I would regard it not as a threat for China's energy security but rather as a sort of insurance for China, an option.

So China doesn't pay for it, most likely Gazprom will have to pay for the pipeline construction on its own as it was with Power of Siberia 1 if needed.

It can take more gas, cheap gas, very cheap gas, which will support China competitiveness of China's industry, by the way.

If it's not needed, okay, it stays in the ground and you don't pay for it.

So China is not losing anything, but it is acquiring additional flexibility and security.

It's really a very valuable proposition.

Jason Bordoff: Erica, is that how you see it, knowing China as well as you do?

Erica Downs: Yeah, I just wanted to pick up on the moment in time point I didn't want to leave people with the impression that it's the trade war and the Iran Israel conflict that all of a sudden is causing a sea change in Chinese thinking about energy security.

Overland pipelines obviously have been a very important component of China's thinking about oil and natural gas supply security.

And I think the point about volumes that Tatiana raises is exactly right, that I think Beijing would like to have the flexibility to take Russian pipeline gas as it needs it and also having that flexibility prevents or allows China to sort of avoid locking itself into this high level of dependence on Russian pipeline gas.

And I also wanted to add that I think when China thinks about natural gas supplies and supply security, domestic production obviously is the first choice.

They can't meet all their needs with domestic production.

So then choice number two is pipeline imports and then choice number three is LNG.

Jason Bordoff: Ann’So quick reaction to that.

And then I just wanted to ask you another question as well.

Anne-Sophie Corbeau: Yes, because I mean what Erica mentioned about LNG is very important.

I mean over the past few years and especially in 2021, we have seen China's ambitions and also relationship to LNG changing, I mean before they were happy to actually have about half of their LNG imports covered by spot, so not contracted LNG but spot.

And then in 2021 when spot prices started to increase, they realized that oh we better actually contract the gas on the long-term basis rather than import spot prices because the spot prices are way too high and suddenly between 2021 and 2024, I mean China had been engaged in really, really remarkable contracting activity.

I mean they have contracted about 85 billion cubic meters over four years, which is quite remarkable.

When you are looking, and this has been US LNG Qatar LNG, a little bit of Arctic LNG 2, I mean LNG coming from various countries but in particular from the United States.

And that means that we have seen, if you are looking at the volume of contracted LNG by Chinese companies, you are seeing a very rapid increase of the contracted volumes from 2021 to roughly the end of the decade.

And then what happens after that is that a certain number of the contracts which were signed before 2021 and actually up to 2021 are going to start expiring.

So in the middle of the 2030s, suddenly you are seeing this amount of contracted volumes declining very rapidly.

So if you are looking at this picture of contracted LNG by China right now, and you imagine that post 2030 maybe the LNG demand is going to be relatively flat, then you have a gap emerging potentially to be filled by Power of Siberia 2 if none of the contract is actually renewed.

But imagine that you are China or Chinese companies, that gives you a fantastic flexibility because if as we mentioned this pipeline comes, but you are maybe contracting 50% in terms of take or pay, so you have 25 billion cubic meters, but you have still the option to increase.

I mean you can renegotiate all your contracts which are expiring and say, well actually I have all these cheap gas from Russia, so what are you offering to me in terms of pricing, in terms of flexibility, et cetera?

Because I always have the option of taking more Russian gas.

So for China it's a fantastic negotiating power.

It's a fantastic leverage.

And for the global gas market, that would be a pretty big problem because when you are looking at some pictures of the global gas market, especially in the 2030s, usually you see a gap opening between supply and demand.

But if suddenly we have this Power of Siberia 2 coming in and especially if it is at relatively high levels in terms of volumes, then the LNG demand is going to be reduced and we have a certain number of projects coming, we're still waiting to take final investment decision.

So as Tatiana mentioned before, that could potentially mean for them that they're not going to take final investment decision because they are seeing that the future picture of supply and demand in the 2030s is actually closing down.

That is really very interesting development.

Jason Bordoff: So I understand why this development would be consequential for all the reasons you just said for global gas markets, investment in new projects, gas prices.

I want to come back to all of that in a minute, but just to close on the topic of geopolitics, if you're sitting in Washington DC or you're sitting in Brussels, maybe Tatiana I'll ask you, you said that the last time you were on this podcast, I think Russia gets a lot of money by selling oil and gas, but most of that is oil, a little bit of it is gas.

So Russia wants to sell more gas to China.

China wants to buy some more gas from Russia.

Why does this matter?

Not for project developers and for gas markets but for policy makers, national security officials, geopolitics?

Tatiana Mitrova: Yeah, I think it is signaling the change of the global geopolitical map.

For many years, Russia was between the west and the east and now it is saying I am further pivoting to the east.

I've broken up all the ties with Europe.

But there was a chance to reestablish or to find some reset in the relationship with the US.

But actually I don't need it because I have another big and attractive partner China.

And also just think about this Shanghai Cooperation Organization summit where Putin seemed to be absolutely happy.

It was his success and his victory.

It was a message that all the non OECD countries, they are actually ignoring the sanctions regime with Modi shaking hands with Putin and India increasing actually offtake of the Russian oil for which it has got additional tariffs.

So the response is clear China off taking sanctioned Arctic LNG 2 gas and signing for Power of Siberia 2, so basically these countries start to send the message that they are developing their own relationship, which has nothing to do with the financial system of the US with the rules developed by the US and EU.

It is, they are big, they are aligned, they are stronger, and they do not care what the US and EU think about it.

That was accompanied with the military parade.

I think this is a pretty important message to all the policy makers around the world just to reassess how this new world will look like and where it is moving and how to counterbalance it.

It's very serious.

Jason Bordoff: And so let me ask you to sort of expand on the points you were bringing up a moment ago and just help people listening understand kind of why this matters now for gas markets and so what is the renewables and clean energy are growing really fast.

Coal is actually doing pretty well around the world.

What is the outlook for gas demand and for LNG supply in particular, obviously there's a range of uncertainty there.

And if this put 50, we've mentioned the number 50 BCM I think with some other pieces of this up to maybe 60 BCM of gas, put that number in perspective, what would that do to the projected dramatic growth in the US as an LNG exporter?

Is the global gas market still undersupplied?

Is it oversupplied?

How should we understand the impact of this project for gas markets and for prices?

Anne-Sophie Corbeau: So right now in 2025, I would say the global gas market is still relatively tight because I mean we still have spot prices in Asia, in Europe at 10, 11, $12 per million btu, so we are still a little bit tight, however, we are just at the beginning of what I call the third wave of LNG.

And this third wave is absolutely exceptional.

This third wave is led two thirds by the US and Qatar.

But what is extraordinary about this third wave of LNG is, but this is much bigger than the first wave, which was Qatar 2009, 2011, and then the second wave of US Australia 2015 2019.

So if I give you numbers, it's 100 for the first one, 200 for the second 1, 360 for the third one, it's very big expansion, especially considering that global LNG trade last year was 550 billion cubic meters.

So even if within those 360 BCM there is a project like Arctic LNG 2, which is sanctioned but maybe not sanctioned in the end or Mozambique LNG, which is a little bit in trouble, this is still a remarkable expansion and maybe it's not over because we are seeing in particular in the United States but also in Canada and a few other countries, some projects which are still expecting to take FID.

So we are going to see a lot of LNG coming to the market over the period 2025 and the early 2030s.

Big question is where is this LNG going to go?

And if Power of Siberia 2 then comes in the early 2030s, there is a possibility that this oversupply that we see starting to take shape in the late 2020s could actually continue in the early 2030s, which of course would have an implication for global gas prices for a certain number of project which maybe would face shut ins will face under utilization.

So this is a very big signal.

And let me also say that in the global gas market, I have never seen such tensions between those people who are thinking global gas demand, global energy, energy demand are going up forever after up to 2050.

Definitely because this is where usually people stop and other people like some of the IEA for example, showing that eventually in the 2030s or 2040s global energy demand is going to drop.

And China is a very interesting country because as we have written previously with Tatiana, it's an electro state.

I mean the increase in terms of electrification in this country compared to other countries is absolutely remarkable.

And in particular the increase in the share of renewables is absolutely remarkable.

And it's not completely impossible that people are maybe a bit too optimistic about first of all gas demand in China, which has been very much led by residential and industry and not so much by the power generation sector.

But of course, even if you have 3% of the 10,000 terawatt hours, well it's quite a bit of volumes.

But I would say that where I see the most difference is between different projections is how bullish people are on the use of gas in power generation in China.

So maybe we have been too bullish on the gas demand in China in total, and if suddenly on top of that you have the Power of Siberia 2 coming in, then this is not looking good at all for the global LNG market.

Jason Bordoff: And the consequence of that, if you're in Europe where you're sitting and you're worried about high energy prices which are hurting economic competitiveness, this would be, I presume good news, it brings gas prices down and if you're Qatar, Australia, or the US and you're looking to export LNG, you're worried about this.

Is that the way to think about it?

Anne-Sophie Corbeau: Okay, let me go side by side.

So first Europe, yes, fantastic, thank you so much.

I mean in 2022 it was actually thanks to China, but we got about 20 BCM back because of COVID, zero COVID policies and gas demand was down.

LNG imports were massively down.

We got 20 BCM back.

And I have to say that it would've been catastrophic if China had just kept the same levels in terms of LNG imports this year, yes, again, I mean prices are starting to come down because Chinese LNG imports so far are down about 15, 16%.

So I mean this is great because all this LNG is actually coming back to Europe and in particular because they are no longer US LNG cargo going to China, but coming to US to Europe.

So it's fantastic.

This is actually helping us keeping prices a little bit lower than what we would've expected otherwise.

But if China is no longer there in order to fill global LNG demand, well that could be good for us and that could be good for also a certain number of markets who are looking at potentially lower gas prices.

But the key question is of course, how low these gas prices will go and whether they would actually spur additional demand.

Now on your question, Qatar, well this is an interesting one because, and we have a paper coming very soon on that, I don't know whether it's going to be up by the time the podcast is on, but it's going to be in time for Gastech.

What are the Qataris going to do?

Because they are sitting on a very large amount of uncontracted, LNG supplies.

What is contracted is mostly oil indexed.

So actually whether spot prices are up and down, they don't care.

But depending on what we choose to do and how these additional LNG is going to be contracted, this could have a massive effect on that.

But Qatar is the elephant in the room, but almost nobody is talking about, which could have also a kind of atomic bomb effect on the global gas market Australia.

Well, Australia is actually one of the countries which would be potentially very impacted by what Chinese companies would do because a lot of the LNG, which is going to see its contracts expiring in the 2030s is actually coming from Australia.

And whether these contracts are extended or not, well that is going to be among other things in the hands of the Chinese players.

And don't forget also that between Australia and China, in terms of LNG, it has been okay, but there was a ban from China on Australian coal years ago.

So the relationships have also been a little bit complicated at times.

Jason Bordoff: By the way, just since you brought up Qatar, and it's sitting on my desk, there's no video on this podcast, but you guys can see I'm holding our friend Michael Tanchum's book about the history of how Qatar became an LNG superpower, which I was rereading for some research yesterday and recommend to everyone listening, if they haven't read it, they should pick it up.

It's fascinating.

Tatiana, you wanted to come in?

Tatiana Mitrova: Yeah, actually, Anne-Sophie mentioned all the major LNG producers, but I want to add one more potentially incredibly important player on the global LNG market, which is surprise surprise China.

So China diverting cargoes to Europe.

It is already something that is happening right now.

But then on top of that, with the Power of Siberia 2, and with all these numerous LNG supply contracts and with Chinese trade houses which are becoming much more powerful, it is actually accumulating an incredible market power.

And it's not an OPEC style, it's not producing these gas, but it can manage it, it can trade it, and it can affect the prices.

And wow the way how this market power would be used, I have no idea.

But given the way geopolitics are moving with all these further fragmentation and confrontation, it is a powerful tool I believe.

Jason Bordoff: Erica, anything you want to react to with that?

And in particular, I'm wondering when you think about where China's energy sector is headed, energy strategy is headed, does this give you any information or signals about that?

It's expanding clean energy dramatically.

What does this mean for say, coal to gas switching?

What does it mean for efforts to expand electrification?

Should we read anything into the broader energy strategy that China has from if this deal actually gets done, and I guess you should help, maybe our listeners understand there's still a little bit of uncertainty in terms of the messages coming out of Beijing about whether this actually moving forward or not.

Erica Downs: So I have a couple of points I'd like to make.

First in response to your question about China's energy mix, I think China's coal plus renewables approach to the energy transition in recent years certainly has raised questions about how big a role natural gas is going to play in China's energy mix on this point.

Bloomberg had a story over the summer where they were talking about China's gas lobby and how they were really lobbying for more gas peaker plants to be built in China.

I think that speaks to perhaps the threat they feel from renewables.

And then in the blog post that the three of us did on the Power of Siberia 2 memorandum, we have a quote from PetroChina's head of global LNG, where he talks about renewables backing out coal and taking space that he would've expected perhaps hoped would've gone to natural gas.

And so I think this is where sort of getting back to the points the three of us have been making about what price Power of Siberia 2 gas and how much leverage does that give China in negotiations with LNG exporters when it comes time to renegotiate or replace, some of these contracts are going to expire.

This is where price is going to be very important.

If you're sitting in China, coal is cheap, renewables are cheap, they're both domestically sourced, so secure, whereas natural gas, especially LNG is very expensive.

So this is one of the reasons why I think price is going to be key.

And then Tatiana also made a point that I wanted to make with respect to Power of Siberia and flexibility on volumes.

And this is something that the two of us actually wrote about in our paper on Power of Siberia 2 last year when we were thinking about what does this mean for global gas markets?

And I think if China has this pipeline gas being delivered from Russia, and especially if they have flexibility with respect to volumes, that really gives them a lot of freedom to expand for Chinese companies to expand their roles as global gas traders.

And this is something that they have been building up their capacities in a lot of Chinese companies that have been building up their gas trading teams.

And they have at times, I think turned a nice profit from reselling cargoes that they don't need in China and for which they can command higher prices elsewhere.

So again, I mean this is another way in which Power of Siberia 2 pipeline, this is another way, another reason why it would be attractive to Beijing depending on what terms Beijing is able to negotiate.

Jason Bordoff: And Tatiana, does this change how, when you look at the role China plays in the global gas market, do they play a different role now because they sort of are now a re-exporter of a lot of LNG supplies?

Do they become a more important trader in the global gas market or are they now the balancing market more than Europe had been before?

Tatiana Mitrova: They have this potential if Power of Siberia 2 becomes a reality.

And as you've mentioned, it's not guaranteed this project, just to make it clear, this project may never happen.

It's possible, but if it happens, it potentially gives China this opportunity to significantly increase this flexible capacity that it will be able to trade in the market or just it's like a Saudi Arabia with oil China with gas, which is not produced in China, but in Russia a bit tricky, but it's possible.

And I saw Erica wants to comment on that.

Erica Downs: Yeah, I was actually, no, Tatiana, you made me realize that I had got to mention something I wanted to mention in response to Jason's last question.

And that has to do with how certain are we that this project is going to go forward or not?

And one thing that has struck me in the past week is that while Russian officials have been quite happy to talk about Power of Siberia 2 and the next steps and what it means that Beijing has been much more quiet, that on Tuesday there was a Bloomberg reporter who asked China's Ministry of Foreign Affairs spokesperson to confirm that some sort of agreement had been reached.

And he basically deflected the question and just said that China and Russia cooperate in energy and on the specific project, the reporters should contact the relevant parties.

And again, if you also look elsewhere on the Ministry of Foreign Affairs website, you'll see a readout of Xi's meeting with Putin.

And again, Power of Siberia 2 is not mentioned anywhere in that readout.

Energy is just one of many issues.

It says that the two countries signed agreements on.

And even looking at Chinese press pieces, a lot of what I'm seeing, not all, but a lot of what I'm seeing are Chinese media stories on Power of Siberia 2, quoting from Russia media stories or quoting from other overseas media.

And so to me this sort of raises a question of why aren't we hearing more from Beijing on this issue?

And one reason for that may be that this just isn't a done deal yet.

And so from their perspective, maybe there's just not that much to talk about.

And another reason, and again this is just speculation on my part, are there things that Russia is saying that suggest that maybe Beijing has a slightly different understanding?

And so I just wanted to mention that because I remembered that you had started your previous question with asking me about Jason Bordoff: Ann’So… let me respond to or add anything you want to that.

And then just as we wrap up, I just wanted to ask you to put a finer point on a question I asked you earlier, which is to be as specific as you can, and I understand there's always uncertainty about these things, but let's imagine tomorrow we knew a hundred percent certainty this pipeline was moving forward.

What would that mean for the projected LNG capacity of the United States?

Do you think there would be a meaningful difference in the number of projects that get financing and move forward knowing this pipeline supply is there versus not?

Or does it not change US LNG export capacity very much and price, price of gas, which is really important for economies and for how we think about other fuels.

I mean the outlook for renewables depends on the price of gas.

The outlook for coal depends on the price of gas.

So what do you think the price impact would be in the sort of medium to longer term?

Anne-Sophie Corbeau: I think in the short, medium term, so up to 2030, it wouldn't make that much a difference because the real difference would be the additional expansion of Power of Siberia 1 and the eastern route, which is 6 BCM in total.

So it's not so much, but if Power of Siberia 2 moves forward and this is 50 billion cubic meter, then this is indeed basically potentially closing a window for any US LNG project which wants to take a FID now because as Tatiana mentioned there might have difficulties raising the finance.

So this would be the big difference.

And of course, if everything else remains the same, then we may have lower gas prices and potentially very low gas prices at times for an extended period, which could, like in 2020 for example, create some periods where we have some shut ins of US LNG.

But I would like to come back to one thing on this kind of flexibility and the role of Chinese companies, because we talk a lot about China and maybe we are giving the impression that this is one entity.

I would like to highlight the fact that over the past decade we have seen a big change because before we were talking about the three big companies, the three big NOCs, CNPC and Sinopec plus ENN, and a few others, but really three big companies.

Now you have a myriad of gas companies which are active on the global LNG market, myriad of Chinese LNG companies.

And they may have slightly different strategies.

I mean, yes, the big ones, they could be trading, but the small ones, they also want to import LNG for themselves and for their own consumption and for their own strategy.

So let's not consider that all the Chinese companies which have contracted LNG, have exactly the same behavior, which is going to make the picture even more complicated.

And when we are comparing Europe and China as balancing markets.

Also, I would like to highlight that the interaction between LNG and pipeline gas is not exactly the same also because of the very important price difference.

So it'll be strategic, it'll not be price driven.

And also, I mean, there is no way gas is going to be competitive against coal in the power market.

I mean, there is simply too much difference.

So these are very important differences between China and Europe.

That wouldn't mean that China would never be able to become a balancing market, but it would be a balancing market with Chinese characteristics.

Jason Bordoff: Ann’So, Tatiana, Erica, always fascinating to talk with the three of you.

In addition to being a fascinating look at this gas pipeline project and gas geopolitics, this podcast can be maybe a recruiting and marketing tool since it helps people understand why it is so fascinating to work here and why I feel so lucky and fortunate.

You read something in the paper, you want to understand it better, it's important for energy markets, for geopolitics, and the first thing I get to do is call some of the smartest people I know to explain it to me, and then we do a podcast so other people can listen into that conversation.

So it really is a privilege to call the three of you colleagues and learn from you.

If people want to go deeper on all of this, there's a short paper on our website now that the three of you put together, Tatiana, you have a great piece in the Financial Times this week about Power of Siberia 2 and what's happening between Russia and China and what it means for the rest of the world.

And Anne-Sophie , you have another paper coming out soon on Qatar we just talked about, and we'll just look for more great work from the three of you and talk to you all again soon.

Thanks again for making time to be with us.

Anne-Sophie Corbeau: Thank you.

Erica Downs: Thank you.

Tatiana Mitrova: Thanks.

Jason Bordoff: Thank you again, to Anne-Sophie, Tatiana, and Erica and thank you for listening to this week’s episode of Columbia Energy Exchange.

The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.

The show is hosted by me, Jason Bordoff, and Bill Loveless.

Mary Catherine O’Connor, Caroline Pitman, and Kyu Lee produced the show.

Gregory Vilfranc engineered the show.

For more information about the podcast, or the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @columbiaUEnergy.

And please, if you feel inclined, give us a rating on Apple podcasts -- it really helps us out.

Thanks again for listening, we’ll see you next week.