Bank of China provides EUR 2 billion loan for Power of Siberia Gas Pipeline Project

Project narrative

In March 2016, Bank of China and Gazprom — a Russian state-owned energy corporation — signed a 2 billion euro loan facility agreement for the Power of Siberia Gas Pipeline Project. The loan carried the following terms: a 5-year maturity and an annual interest rate of EURIBOR (-0.134% in March 2016) plus a 3.5% margin. The project involved the construction of a 3,000 kilometer gas pipeline that traverse the Irkutsk and Amur Regions and the Republic of Sakha (Yakutia). The pipeline route passes through swampy, mountainous, seismically active, permafrost and rocky areas with extreme environmental conditions. The absolute lowest air temperatures along the Power of Siberia route range from –41 degrees Celsius in the Amur Region to –62 degrees Celsius in the Republic of Sakha (Yakutia). The project was implemented in three phases (or sections): the first phase (section) of pipeline construction ran some 2,200 kilometers from the Chayandinskoye field (Yakutia) to Blagoveshchensk (Chinese border); the second phase (section) of pipeline construction ran some 800 kilometers from Kovyktinskoye field (Irkutsk Region) to the Chayandinskoye field; and the the third phase involved an expansion of gas transmission capacities between the Chayandinskoye field and Blagoveshchensk. China National Petroleum Corporation (CNPC) was the contractor responsible for project implementation. In May 2014, Gazprom and CNPC signed a Sales and Purchase Agreement for gas to be supplied via the eastern route (Power of Siberia gas pipeline). The 30-year agreement provides for Russian gas deliveries to China in the amount of 38 billion cubic meters per year. Then, on September 1, 2014, Russian President Vladimir Putin and then member of the Standing Committee of the Political Bureau of the CPC Central Committee and Vice Premier Zhang Gaoli attended a groundbreaking ceremony for phase 1 (the eastern line) of the Power of Siberia Gas Pipeline Project in Yakutskiy. On June 29, 2015, the construction of the natural gas pipeline in China officially started. In December 2015, Gazprom signed an agreement with CNPC to design and construct the cross-border section of the pipeline, including the submerged crossing under the Amur River. In May 2017, a temporary two-way checkpoint was opened on the Russian-Chinese border to provide unfettered access to the border area for construction equipment and personnel.As of mid-February 2018, Gazprom had completed the construction of 1,521 kilometers of the pipeline. On December 2, 2019, the pipeline was put into operation and the first-ever pipeline supplies of Russian gas to China were launched.