Geopolitical Energy Dynamics: India, Russia, and China

The recent Shanghai Cooperation Organisation (SCO) summit spotlighted potential geopolitical shifts, particularly concerning an energy agreement between Russia and China. This development has implications for global energy trade and geopolitical alignments.

Power of Siberia 2 Pipeline

• Project Scale: The "Power of Siberia 2" is a proposed pipeline to supply 50 billion cubic meters (bcm) of gas annually to China for 30 years.
• Significance: It is one of the largest, most capital-intensive projects, planned to run from the Yamal Peninsula in Western Siberia to China via Mongolia.
• Current Status: Although unconfirmed by China, the deal's commercial aspects, including gas pricing, are under negotiation.

Implications for Global Gas Trade

• The project could substantially impact global LNG trade, particularly affecting suppliers anticipating increased exports to China.
• China’s total gas imports in 2024: Approximately 180 bcm, with a combination of LNG (107 bcm) and pipeline imports (72 bcm).
• Potential Shift: Russian pipeline supplies to China could reach nearly 100 bcm with the new pipeline.

Russia's Energy Strategy

• Due to reduced European demand, Russia is pivoting towards China, with its exports to Europe dropping from 155 bcm in 2021 to about 39 bcm.
• Russia's need for concluding long-term contracts with China is driven by a strategic realignment in response to geopolitical tensions with Europe.

China's Strategic Gains

• China is leveraging negotiations to secure favorable gas prices.
• It is positioning to reduce dependence on US LNG, which forms only 5% of its imports, amidst trade tensions.
• The potential to replace coal with gas aligns with China's environmental commitments to reduce emissions by 7-10% by 2035.

India's Energy Challenges

• India aims to increase its gas share to 25% by 2035, necessitating affordable gas imports.
• Current imports cover 50% of its gas needs, sourced from Qatar, the US, UAE, and Russia.
• India must balance domestic exploration with diversified import sources, potentially exploring undersea pipelines from the Gulf.

Global LNG Market Dynamics

• The US has significantly increased LNG sales to the EU, which could drive up global prices.
• New LNG export capacities are developing in countries like Russia, Mozambique, and Qatar, adding complexity to market predictions.

The discussion concludes that India's energy strategy should focus on enhancing domestic production and maintaining diverse import sources to adapt to global energy shifts.