On September 2, 2025, Russia's Gazprom and China's CNPC signed a legally binding memorandum to advance the construction of the Power of Siberia 2 gas pipeline. This project is set to deliver up to 50 billion cubic meters (bcm) of natural gas annually from Russia's Yamal fields to China via Mongolia over a 30-year period.
The agreement signifies a deepening energy partnership between Moscow and Beijing, underscoring Russia's strategic pivot towards Asian markets to compensate for reduced European demand. In addition to the new pipeline, agreements were reached to increase gas deliveries through existing infrastructure. Supplies via the Power of Siberia pipeline are set to rise from 38 bcm to 44 bcm per year, and deliveries through the Far Eastern route and Sakhalin Island are expected to increase from 10 bcm to 12 bcm annually.
Michal Meidan, head of China Energy Research at the Oxford Institute for Energy Studies, views this development as a significant geopolitical statement, suggesting it indicates China's readiness to operate independently of Western sanctions and global political pressures. However, the memorandum is considered an intermediate step, with crucial commercial terms such as pricing and financing still under negotiation. Analysts note that while such agreements establish legal obligations to continue negotiations, they do not finalize sensitive details like pricing formulas or take-or-pay clauses.
Discrepancies in pricing expectations are notable, with China reportedly seeking rates around $120-130 per 1,000 cubic meters, significantly lower than Russia's desired $265-285 per 1,000 cubic meters. The Power of Siberia 2 project is anticipated to reshape global energy markets, potentially extending the period of global gas oversupply into the 2030s. For China, the pipeline offers enhanced energy security by diversifying import sources and reducing reliance on liquefied natural gas (LNG) from the United States and Australia.
Mongolia's role as a transit country is critical, though the project's exclusion from its national development plan until 2028 introduces potential delays and complexities. Despite these ongoing negotiations and potential hurdles, the agreement represents a substantial step forward, highlighting the growing interconnectedness of energy flows and strategic alliances across Eurasia. The project's ultimate success will hinge on the resolution of these commercial details.