Russia and China Gas in 2026: Power of Siberia 1 Ramps, Power of Siberia 2 Stalls, and the New Eastern Pricing Reality

Power of Siberia 1: contract delivery, not strategic surge #

Power of Siberia 1, the 3,000 kilometer pipeline from the Chayanda and Kovykta fields in eastern Siberia to the Heihe border crossing, is the operational anchor of the Russia and China gas relationship. The take-or-pay contract was signed by Gazprom and CNPC in May 2014 for 38 bcm per year over thirty years, with first gas in December 2019. Deliveries have ramped on schedule: 4 bcm in 2020, 10.4 bcm in 2021, 15.5 bcm in 2022, 22.7 bcm in 2023, and approximately 31 bcm in 2024 according to Gazprom export disclosures. Full design throughput of 38 bcm is targeted for 2025, with 2026 planned to clear at the contractual ceiling.

The pricing formula is the contested element. The 2014 contract was indexed to a basket of oil products with a Henry Hub adjustment clause that has worked against Gazprom as Asian LNG benchmarks softened from the 2022 peak. Russian customs data and Chinese import statistics suggest a 2024 average border price near USD 260 per thousand cubic meters, materially below the USD 350 to 400 range Gazprom historically captured in Europe and below current TTF. The discount is the price of the eastern pivot: it locks volume but cedes margin to a single counterparty.

The Far East line, a separate 10 bcm pipeline from Sakhalin to northern China, is the second leg of the eastern footprint. Gazprom and CNPC signed the supplemental contract in February 2022 and target full capacity by 2027. Initial deliveries began in early 2025 at roughly 1 to 2 bcm. Combined with Power of Siberia 1, contracted Russian pipeline supply to China reaches 48 bcm by 2027, against Chinese 2025 gas demand near 430 bcm.

Power of Siberia 2: the FID that did not arrive #

Power of Siberia 2, the proposed 50 bcm line from the Yamal Peninsula across western Siberia and Mongolia to northern China, was announced in 2020 and accelerated rhetorically after the 2022 European market loss. Mongolia approved the Soyuz Vostok transit segment in its 2024 to 2028 development plan, and Gazprom completed feasibility design work the same year. The expectation through 2023 was that Vladimir Putin's October 2024 Beijing visit would yield a framework agreement and that final investment decision would follow in 2025. Neither happened.

The impasse is commercial, not engineering. CNPC has demanded a price near or below Russia's domestic regulated tariff of roughly USD 80 per thousand cubic meters, a level that Gazprom cannot accept without writing down the upstream development case. Chinese negotiators have also pushed for tax exemptions on the Russian segment and for a volume profile that ramps slowly rather than committing to take-or-pay at the headline 50 bcm. Mongolia, which would collect transit fees, has reportedly sought stronger fiscal terms than Moscow is willing to underwrite. The Financial Times and Reuters both reported in early 2025 that the Mongolian government quietly removed the project from its 2025 to 2027 priority list.

Beijing has no urgency. Domestic gas production reached 246 bcm in 2024, with the Sichuan basin shale plays at Changning and Weiyuan, the Tarim basin in Xinjiang, and the Ordos basin tight gas fields all expanding. Coastal regasification capacity exceeds 240 bcm per year by mid-2026. Long term Qatari LNG under the 27-year North Field East and South deals signed with CNPC, Sinopec, and PetroChina in 2022 to 2024 secures roughly 20 bcm per year of priced flexibility. Mozambique Coral South adds further optionality. Power of Siberia 2 is, from Beijing's vantage, a price negotiation with no production gap behind it.

The European collapse and the asymmetry it created #

Russian pipeline gas to Europe has collapsed by an order of magnitude. BP Energy Institute and IEA Gas Market Report data place Russian pipeline exports to the European Union and the United Kingdom near 150 bcm in 2021, falling to roughly 62 bcm in 2022, 28 bcm in 2023, and 25 bcm in 2024. Nord Stream 1 and 2 are out of service after the September 2022 sabotage. The Yamal-Europe line through Belarus and Poland has been idle since 2022. The Ukraine transit corridor, which carried about 14 bcm in 2024, expired on 1 January 2025 when Kyiv refused to extend the Gazprom and Naftogaz transit agreement. TurkStream into southern Europe is the only meaningful surviving route, delivering approximately 16 bcm in 2024 to Turkey, Hungary, Serbia, and Slovakia.

Russian LNG to Europe held up better than pipeline gas, which is the binding constraint the EU has now moved to close. The 14th sanctions package, adopted in June 2024, banned the use of EU ports for transhipment of Russian LNG to third countries effective March 2025 and phased in restrictions on new investment in Russian LNG projects. The Zeebrugge and Montoir transhipment volumes that fed Yamal LNG cargoes onward to Asia have collapsed. Novatek's Yamal LNG continues to operate Trains 1 through 3 at near nameplate, but Yamal LNG Train 4, originally targeted for 2024 commissioning, remains stalled by sanctions on Arctic-class carriers and on Baker Hughes liquefaction technology. Arctic LNG 2, the second Novatek mega project, has produced minimal commercial volumes since US sanctions in November 2023. Argus Media tracking documents a shadow fleet of older LNG carriers, frequently reflagged in Gabon and the Cook Islands, lifting cargoes from Sabetta and the Saam floating storage unit near Murmansk, with Krasnoyarsk and Gorky among the FSU vessel names recorded across roughly 96 transhipment events through 2024 and 2025.

Sakhalin-2 and the LNG sanctions perimeter #

Sakhalin-2, the 11.5 mtpa LNG facility on Russia's Pacific coast, continues to operate under a Russian decree that transferred the asset from a Shell led joint venture into a new Russian operator in 2022. Japanese utilities including JERA, Tokyo Gas, and Hiroshima Gas retained their offtake on long term contracts under METI guidance, taking roughly 6 mtpa in 2024. South Korean buyers have reduced exposure but have not exited. The plant operated near 95 percent of design capacity through 2024, sending approximately 14 to 15 bcm of regasified equivalent to Japan, Korea, and China.

The LNG sanctions perimeter is the variable to watch. The EU 14th package targeted transhipment and new project investment, not existing offtake, leaving Sakhalin-2 and the operating Yamal LNG trains commercially live. The United States has expanded SDN designations against Russian LNG infrastructure and ice class shipping but has stopped short of secondary sanctions on Asian buyers. A 15th EU package, under discussion in spring 2026, would extend restrictions on services, financing, and insurance to Russian LNG cargoes regardless of European port involvement. Carnegie Russia Eurasia analysis assigns a meaningful probability to Russian LNG to Europe being effectively zeroed by 2027. Without Train 4 at Yamal LNG and without Arctic LNG 2 at scale, Russian LNG export growth ceases.

Beijing's portfolio and the bargaining floor #

Chinese gas demand reached approximately 430 bcm in 2025 according to NDRC and CNPC research institute data, up from 380 bcm in 2023. The supply mix is the structural reason CNPC can hold a hard line on Power of Siberia 2. Domestic production covers about 57 percent of demand. Pipeline imports from Turkmenistan via the Central Asia gas pipeline contribute around 35 bcm. Power of Siberia 1 will add 38 bcm. The remainder is LNG, where China imported approximately 78 mtpa in 2024 and is projected near 82 mtpa in 2026.

The LNG book is increasingly long dated and diversified. QatarEnergy long term sale and purchase agreements with Sinopec, CNPC, and PetroChina total roughly 17 mtpa across 27-year tenors signed between November 2022 and June 2024. Mozambique Coral South FLNG, Australian legacy contracts, and a measured exposure to United States LNG, constrained by reciprocal tariff cycles between Beijing and Washington, complete the portfolio. S&P Platts and Argus Media spot tracking shows Chinese second-tier buyers continuing to participate in the JKM linked spot market when prices clear under USD 11 per MMBtu. Coastal regasification expansion to 240 bcm by end of 2026, with new capacity at Tianjin, Yantai, and Wenzhou, is the enabling asset. Oxford Institute for Energy Studies analysis notes that the elasticity of Chinese gas demand to price has fallen as industrial buyers and city gas distributors diversify rather than commit to single counterparties, a structural feature that further weakens Gazprom's bargaining position.

Russian fiscal exposure and the price for sanctions relief #

Gazprom posted a net loss in 2023 for the first time since 1999 and a marginal recovery in 2024 driven entirely by Asian volumes and rouble depreciation. The 2025 federal budget assumes oil and gas revenues at roughly 26 percent of consolidated receipts, with gas-specific contribution under 4 percent, a sharp fall from the pre-war ratio. Mineral Extraction Tax adjustments and the elimination of the export gas premium have shifted the fiscal architecture: the Russian state can no longer rely on Gazprom as a marginal source of foreign exchange in the way the 2010 to 2021 period allowed.

The asymmetry with China is now the binding constraint on Russian energy diplomacy. Carnegie Russia Eurasia and OIES analyses converge on the view that Moscow cannot walk away from a Power of Siberia 2 deal at almost any price because the alternative is stranded Yamal upstream that was developed for European pipeline export. Beijing knows this. CNPC's negotiating posture, which combines slow walking on FID, demands for Henry Hub minus pricing, and tax concession asks, is consistent with a counterparty that holds the time advantage.

What to watch through 2026 and 2027 #

Three signals will determine the trajectory. First, whether a Power of Siberia 2 framework agreement is announced at the 2026 SCO summit or the September 2026 Eastern Economic Forum. The base case is no FID inside 2026, with a probability of around 60 percent on the current price gap. Second, whether the EU 15th sanctions package extends to a comprehensive Russian LNG ban, which would force Asian buyers either to accept secondary sanction risk or to step back. Third, whether the Far East line ramps cleanly to its 10 bcm design through 2026 and 2027, since that pipeline is the cleanest test of execution capacity on smaller segment investments while Power of Siberia 2 remains contested.

For European policy, the actionable conclusion is that the REPowerEU stated phaseout of Russian fossil fuels by 2027 is now within reach on pipeline gas and contingent on the 15th package on LNG. For Asian buyers, Russian LNG remains a tactical optionality trade rather than a strategic supply pillar, and Power of Siberia 1 is a delivered reality rather than a swing supply. For Moscow, the eastern pivot has stabilized volume but capped margin, and the Russian fiscal model now sits closer to a commodity exporter constrained by a single dominant buyer than to the energy superpower posture of the prior decade.

Sources #

• Gazprom investor relations and export statistics
• CNPC investor relations and gas market data
• BP Energy Institute Statistical Review of World Energy
• IEA Gas Market Report Q1 2026
• S&P Global Platts LNG and gas pricing
• Argus Media LNG and pipeline gas tracking
• Reuters Russia and China energy coverage
• Financial Times Power of Siberia 2 reporting
• Carnegie Russia Eurasia Center analysis
• Oxford Institute for Energy Studies natural gas programme