How the Big Deal will affect the world gas market ? Russia to supply China with gas for 30 years …

China’s deal to buy natural gas from Russia after a decade of talks risks making tanker shipments of the fuel less competitive as new projects target Asian markets.
The accord for supplies from eastern Siberia means liquefied natural gas export projects are less likely to be built as the additional Russian pipeline gas pressures prices, according to Societe Generale SA and Sanford C Bernstein & Co. The agreement gives China greater leverage when negotiating LNG contracts, said Trevor Sikorski, head of natural gas, coal and carbon at Energy Aspects Ltd in London, a consultant.
“It could potentially have an impact on the volume of LNG that China needs to import and impact on the level of the spot price for LNG in Asia,” David Ledesma, an independent consultant who has been working in the LNG sector for more than 20 years, said on Wednesday in an interview in Amsterdam.
China’s appetite for gas will double by 2018 as the world’s biggest energy user seeks to replace dirty coal-burning power plants, according to the International Energy Agency. LNG market tightness will start to disappear from 2015 with new supply, according to the Paris-based adviser to developed nations, after spot prices rose to a record in February.
Spot LNG prices in northeast Asia fell to $13.50 a million British thermal units, their lowest since October 2012, in the week to May 19, according to World Gas Intelligence assessments of cargoes for delivery in four to eight weeks published on Wednesday. They reached $19.70 in February. 
China paid from $3.25 per million Btu for LNG from Australia last month to $19.97 for a shipment from Algeria in November, according to data compiled by Bloomberg. Its imports rose 27% last year to 18.6mn metric tonnes, overtaking Spain to become the biggest importer after Japan and South Korea, according to the International Group of LNG Importers, a lobby group in Paris.
Companies from Cheniere Energy in the US to Woodside Petroleum in Australia plan to add LNG capacity from next year, mainly aimed at Asia, which uses 75% of the gas, which is chilled to minus 162 degrees Celsius (260 Fahrenheit) for shipment.
There has been 312mn tonnes of gas liquefaction capacity proposed and 94mn is under construction, according to data compiled by Bloomberg Industries. The plants from Australia to the US would add to the existing 296mn tonnes of operational capacity.
“Higher cost LNG projects will be less likely to be developed,” Neil Beveridge, an analyst at Bernstein in Hong Kong, said on Wednesday in an e-mailed report. “Likely beneficiaries are Gazprom, Chinese gas distributors and related oilfield services companies.”
The agreement with Gazprom, Russia’s pipeline gas export monopoly, to provide 38bn cubic meters of gas annually over 30 years via a yet-to-be-built pipeline increases the diversity of supplies available to China. The country currently imports gas via a pipeline from Turkmenistan as well as LNG.
Gazprom’s average price in Europe, its main market, was $380.50 per thousand cubic meters ($10.65 per million Btu) last year. The price in yesterday’s contract is about $350, Russian Economy Minister Alexei Ulyukayev said in a Bloomberg TV interview yesterday. Gazprom chief executive officer Alexey Miller didn’t disclose the price on Wednesday, saying the 30-year accord has a value of about $400bn.
Qatar, the world’s biggest LNG producer, has been in negotiations with China National Offshore Oil Corp and PetroChina Co to supply 7mn tonnes a year. China has long-term contracts for 5mn tonnes of Qatari supply.
The accord with Russia will have a negligible impact on the LNG market, according to Tony Regan, a Singapore-based energy consultant at Tri-Zen International Inc.
“This deal results in a slight reduction in the rate of growth in LNG imports but nothing that is going to keep anyone awake at night in Doha,” he said by e-mail. “The deal could actually lead to a call for yet more LNG. With Russian supply now booked, it will give the planners comfort to keep building out the domestic gas market and then we are likely to see them calling for more supply – more LNG, more piped gas from Central Asia.”
Japan and South Korea, the world’s two largest buyers of contract LNG, will face tighter supplies by 2025, according to Gavin Thompson, head of Asia gas and power research at Wood Mackenzie Ltd. The Russia-China pipeline deal won’t give the Japanese or Korean buyers leverage in near-term LNG negotiations because they already have enough contracted supply through the start of the next decade, he said. For Gazprom, the deal heralds a “new Europe,” Wood Mackenzie said in a separate research note yesterday.
The impact of the agreement on European supplies and prices will be limited because Gazprom will ship to China from fields in eastern Siberia, while Europe is mainly fed by projects in western Siberia and there isn’t a link between the two, according to analysts from Sund Energy, the Oxford Institute for Energy Studies and the Institute of Energy Studies of the Russian Academy of Sciences.
“The deal changes the level playing field,” said Thierry Bros, an analyst at Societe Generale in Paris. “China has now secured some new gas at a competitive price. This means that new LNG” will need to be competitive with that to go ahead.