Gas Pipeline: Mongolia and China Briefing

Debate

Gazprom from Russia has been negotiating with China over gas price per 1,000 cubic

metres for the Altai pipeline, which was originally proposed in 2006. Russia is offering

$350-400 per 1,000 cubic metres, but China insists on $200-250 per 1,000 cubic metres.

In China’s advantage, they have landed energy resources from Central Asia, Australasia,

Southeast Asia, the Middle East, and North America. They also do not want West

Siberian gas for fear that Russia would use their proposed gas supply line to sell to

Europe. China has played its cards well biding its time in this deal, while Russia has

staunchly held onto oil indexation prices. 1

Current Situation

Across North Eastern nations, natural gas has increased significance with long-term

demand. The current problem is how nations should respond to the growing demand, and

secure a stable gas supply. China’s high gas demand comes from their quest to move

away from coal and towards clean energy, as it will make them look better for the global

audience and promote their high economic growth. Mongolia has been experiencing a

growing importance and presence. Currently, they are trying to expand gas opportunities

through their rich mineral resources. For all the countries in NAGPF, which are Japan,

China, South Korea, Russia, and Mongolia their goals are to develop natural gas

infrastructure, supply gas at competitive prices, and set up relevant regional cooperation. 2

Mongolia Today

Sanjaasuren Oyun from Mongolia’s parliament stated, “Whoever controls energy controls

everything”. For Mongolia’s future relationship with China they do not want to be a grab

bag for China who simply takes what they want at convenience. The Tavan Tolgoi

railway is being built to curb dependence on China, and give Mongolia alternative export

1 Hulbert, Matthew. "President Putin's Growing Gas Insanity." Forbes. Forbes Magazine, 29 Sept. 2012. Web. 04 June 2014.

2 Koyama, Ken. "An International Gas Conference in Mongolia." An International Gas Conference in Mongolia (2011): n. pag. Web. 4 June 2014.

routes to Japan and South Korea. For its future, Mongolia does not want to inherit the

Saudi Arabia model where a few families control the country and all the money.

Resource wise, coking a metallurgical coal used to make steel is plentiful in Mongolia,

which it hopes to export to China. The Gobi desert has enough resources to meet China’s

import needs in 2011 for the next 160 years. Value wise, the Mongolian Mining Corp in

2010 on the Hong Kong stock exchange sold $650 billion worth of stocks. Investors

bought 20% of the company based off the potential that Mongolia’s partnership with

China was estimated to produce. A 2011 nationwide poll was taken asking citizens who

Mongolia’s best business partner would be, and surprisingly China ranked last, while

Russia ranked first. Mongolia’s President Tsakhia Elbegdors related that his country must

balance the interests of China and Russia, while also nurturing close ties with the U.S. 3

Altai Pipeline

At a proposed 2,600 km to produce 30 billion cubic metres of gas for 30 years the Altai

pipeline’s biggest obstacle besides Russia and China’s price disagreement is that the

pipeline passes through China’s Kanas Nature Reserve and Siberia’s Ukok Plateau. These

places house rare plants, animals, ecosystems, and cultural sites. The pipeline would also

displace indigenous people such as the semi nomadic Telengit. It is also presumed that

this would accelerate the settlement of Han Chinese in Xinjiang and kick out the Uighur

minorities. 4

At $14 billion for construction, there is a debate to reroute the Altai Pipeline through

Mongolia to China to avoid the Kanas Reserve and Ukok Plateau. This would be

beneficial for Mongolia because gas could be siphoned off from the pipeline and brought

to power Mongolian cities and supply gas heat. However, adding another nation to the

Altai Pipeline plan would push back the 2015 expected date when gas supplies would

first arrive in China. 5

The Power of Siberia Gas Pipeline

3 Higgins, Andrew. "China, Rich with Coal, Seeks More next Door in Mongolia to Meet Its Energy Needs." Washington Post. The Washington Post, 16 July 2011. Web. 06 June 2014.

4 Letman, Jon. "Saving Shambala from a Russia-China Pipeline." - Opinion. Aljazeera, 7 Dec. 2011. Web. 06 June 2014.

Recently, China and Russia signed a $400 billion gas deal for 30 years worth of gas. This

Eastern route known as the Power of Siberia Pipeline has been in negotiation for a decade

similar to the Altai pipeline. Gas will come from Siberia’s Kovykta gas field in Irkutsk

and the Chayanda in the Sakha Republic. The pipeline will provide 38 billion cubic

metres of natural gas annually starting in 2018. The Western Altai pipeline route is still

on the table, but also still not a guaranteed deal. 6

References

5 Johnson, Jenny. "Gas Pipeline from Russia to China Threatens World Heritage Site." Gas Pipeline from Russia to China Threatens World Heritage Site. China Dialogue, 19 Dec. 2012. Web. 06 June 2014.

6 "Major Economic Boom Expected for Siberia in Gas, Construction and Trade between Russia and China." RSS. The Siberian Times, 22 May 2014. Web. 06 June 2014.

1. Higgins, Andrew. "China, Rich with Coal, Seeks More next Door in

Mongolia to Meet Its Energy Needs." Washington Post. The Washington

Post, 16 July 2011. Web. 06 June 2014.

2. Hulbert, Matthew. "President Putin's Growing Gas Insanity." Forbes.

Forbes Magazine, 29 Sept. 2012. Web. 04 June 2014.

3. Johnson, Jenny. "Gas Pipeline from Russia to China Threatens World

Heritage Site." Gas Pipeline from Russia to China Threatens World

Heritage Site. China Dialogue, 19 Dec. 2012. Web. 06 June 2014.

4. Koyama, Ken. "An International Gas Conference in Mongolia." An

International Gas Conference in Mongolia (2011): n. pag. Web. 4 June

2014.

5. Letman, Jon. "Saving Shambala from a Russia-China Pipeline." - Opinion.

Aljazeera, 7 Dec. 2011. Web. 06 June 2014.

6. "Major Economic Boom Expected for Siberia in Gas, Construction and

Trade between Russia and China." RSS. The Siberian Times, 22 May 2014.

Web. 06 June 2014.