Russian gas giant pivots toward Asia as European demand stagnates. ©WSJ
Russian gas giant pivots toward Asia as European demand stagnates. ©WSJ

Gazprom’s finance chief expects a major gas-supply deal the Russian company struck with China last year to be profitable despite the current slump in global energy prices.

In an interview with The Wall Street Journal, Gazprom Chief Financial Officer Andrey Kruglov said the company views the current fall in oil prices as part of a future development towards Asian market.

The deal China has struck to buy gas from Russia’s state-owned Gazprom over the next 30 years is unlikely to effect gas supplies to Europe, despite EU concerns about energy security within the trading bloc.

The multi-billion dollar deal marks a significant shift in Russia’s energy policy, as it seeks new markets for its natural resources in the face of EU sanctions imposed due to its actions in the Ukraine.

Chinese president Xi Jinping and Russian president Vladimir Putin signed the deal in Beijing, following 10 years of negotiations between the two countries. Under the terms of the agreement, Gazprom will supply CNPC, Chana’s largest oil company, with up to 38 billion cubic metres (bcm) of gas a year for 30 years, beginning in 2018. No official price has been announced for the deal, however it is believed to be wot=rth more than $400bn.

The most significant aspect of the deal is what it symbolises rather than its practical impact. As well as China opening up as a market for pipeline gas and liquefied natural gas, it emphasizes Russia’s focus turning to the East as a market for the energy that it produces. This is an ongoing process which is consistent with Russia’s longstanding policy of seeking to achieve and maintain pricing parity of Urals crude oil with Brent crude oil.

Gazprom chief executive Alexei Miller described the new deal as “the biggest contract in the entire history of the USSR and Gazprom – over 1 trillion cubic metres of gas will be supplied during a whole contractual period.

To meet the contract, Gazprom plans to develop the Kovykta and Chayanda gas fields in east Siberia and to invest $55bn in a new pipeline to the Chinese border.

Gazprom said that while the two parties have agreed on a base price, some conditions are yet to be settled. Russian energy minister Alexander Novak said that both countries would effectively subside the contract through tax exemptions, under the terms of an intergovernmental deal to be agreed by the end of the year.