China and Russia on Wednesday a signed a multi-billion dollar gas deal that took 10 years in the making and is expected to supply 38 billion cubic metres of natural gas to China every year from 2018.
The value of the deal signed during an ongoing security summit in Shanghai wasn’t shared officially but it is estimated to be worth over $ 400 billion.
Protracted negotiations over the deal were stuck over pricing but Russian President Vladimir Putin had indicated days before that the talks on the deal had made “significant progress”.
A statement put out on their website by the China National Petroleum Corporation (CNPC) said the contract will see the east route pipeline starting providing China with 38 billion cubic meters of natural gas annually from 2018.
In 2013, CNPC signed a framework gas supply agreement with Russia's Gazprom, the world's largest gas company.
According to the BBC, the deal was inked at 4 am local time in the presence of Putin and Chinese President Xi Jinping.
The agreement helps both countries: Russia under the threat of sanctions over Ukraine is looking for markets other than Europe and to China it will provide an energy alternative to its coal-driven energy sector, considered as one of the main causes behind the country’s dangerous levels of pollution.
“Natural gas has become an important option for China's sustainable development. Consumption of natural gas stood at 167.6 billion cubic meters in 2013, up 13.9 percent year on year, while the natural gas imports rose 25 percent from a year ago,” a state media report said.
"The deal...fully embodied the principle of mutual trust and mutual benefit of China and Russia," the CNPC statement said.
It added that the agreement will accelerate the economic and social development in Russia's far-east region, and also diversify the export of the major oil and natural gas exporter.
“China and Russia have vowed to strengthen cooperation in energy and infrastructure in Russia. According to a joint statement signed by the two leaders after their talks on Tuesday, the two countries will ‘establish a comprehensive energy cooperation partnership’”, Xinhua, the official news agency, said in a report.
China is Russia's largest single trading partner, with bilateral trade in 2013 valued at f $9 0bn. Moscow and Beijing want the volume to double to $ 200bn in the next decade.