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. Last Updated: 07/27/2016

China Reluctant to Pay More for Gas

BEIJING -- China is unwilling to pay the "considerably higher" natural gas prices that Gazprom is asking, potentially delaying a project to build two pipelines between the countries, a senior company official said.

The project is being held back because China National Petroleum, the nation's biggest company, and Gazprom could not agree on the price, Alexei Mastepanov, an adviser to the company's deputy chairman, told reporters in Beijing on Thursday. Both sides have agreed on the volume and destinations for the fuel, he said.

China is boosting ties with Russia to supply the energy needed for an economy that expanded 11.5 percent in the first three quarters. Gazprom is increasing prices as domestic demand for the fuel rises and as the company's second-quarter profit fell 25 percent on costs.

"When the Chinese considerably need gas, that's when the agreement will be reached," Mastepanov said. Both sides have agreed "in principle" to supply 68 billion cubic meters of gas per year to China through the two pipelines, he said, declining to say how much Gazprom was asking for the fuel.

China does not need Russian gas until 2012, so there's no "urgency" to complete talks, Vladimir Sayenko, deputy head of the fuel and energy department at the Industry and Energy Ministry, said Wednesday at a Chinese-Russian-Kazakh oil and gas forum in Beijing.

The cost of the first phase of construction of a crude oil pipeline from Russia to China has risen to $12 billion because of rising raw material costs and the depreciation of the dollar, Sayenko said Wednesday. The original budget was $6.6 billion to $6.7 billion, he said.

Russia is asking higher prices from oil and gas exports to China as international benchmarks rise, Xia Yishan, an adviser to the China on Russian-Chinese pipeline projects, said Wednesday.