Gazprom JSC, the largest natural gas producer in the world, and the China National Petroleum Corporation, Chinese state-owned oil and gas corporation and the largest integrated energy company in the People’s Republic of China, have confirmed their intent to sign contract for Russian gas supply to China until the end of this year. Negotiations are to finalize a contract envisaging the annual export of about 68 billion cubic meters (2, 401 billion cubic feet) of gas to the People’s Republic of China.

Beijing hosted working meetings of Alexander Medvedev, Deputy Chairman of the Gazprom Management Committee, Jiang Jiemin, Chairman of the CNPC Board of Directors and Wang Dongjin, CNPC Vice President.

Gazprom and CNPC agreed to step up the negotiations on Russian natural gas supply via the eastern route with a view to sign a gas purchase and sale contract with a validity period until 2013. This deadline was set according to the decision of the Russian-Chinese Intergovernmental Commission on Energy Cooperation headed by Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation and Wang Qishan, Vice Premier of the State Council of the People’s Republic of China.

The parties confirmed the previously arranged basic parameters of Russian gas export to China, including the volume of delivered gas, the starting date of supplies and their duration, gas delivery point on the border and other conditions. In the nearest future the negotiations will be continued on the expert level to reach agreements on other supply terms as soon as possible.

In addition, the parties paid attention to LNG cooperation outlooks, primarily, to the potential interaction within the Vladivostok-LNG project.

Background

China National Petroleum Corporation (CNPC) is a Chinese state-owned oil and gas corporation and the largest integrated energy company in the People’s Republic of China. It has its headquarters in Dongcheng District, Beijing. CNPC is the parent of PetroChina, the second largest company in the world in terms of market capitalization as of June 2010.

Gazprom and CNPC signed the Agreement of Strategic Cooperation on October 14, 2004. Among other things, the Agreement covers examination of the issues relative to the arrangement of natural gas delivery from Russia to China by Gazprom. The opportunities are also being explored for joint gas processing and gas chemical projects in eastern Russia and in third countries. The Joint Coordinating Committee was set up to supervise the Agreement implementation. The Committee resolved to set up the Joint Working Group to ensure day-to-day execution of the Agreement in parallel with working groups for major joint businesses.In October 2009 Gazprom and CNPC inked the Framework Agreement on major terms and conditions for natural gas supply from Russia to China. In December 2009 the Heads of Agreement on Gas Supply from Russia to China were signed.Currently, Gazprom and CNPC are negotiating the commercial parameters of Russian gas supply projects envisaging the annual export of about 68 billion cubic meters of gas to the People’s Republic of China.