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As global energy markets shift under the weight of geopolitical tensions and the race for energy security, China and Russia are intensifying discussions on the Power of Siberia 2 (PoS-2) pipeline, a massive infrastructure project poised to reshape natural gas trade in Asia. With the existing Power of Siberia 1 (PoS-1) pipeline already delivering Russian gas to China, PoS-2 represents a bold step in Russia’s pivot to Asia and China’s quest for diversified energy supplies. But what does this mean for the region’s energy landscape, potential customers, and global trading blocs? Let’s dive into the details.
Power of Siberia 1: The Foundation of Russo-Chinese Gas Trade
To understand the significance of PoS-2, we first need to look at its predecessor, Power of Siberia 1. Launched in December 2019, PoS-1 is a 5,111-km pipeline stretching from Russia’s eastern Siberian fields to China’s northeastern city of Heihe, with connections extending as far as Shanghai. The pipeline, operated by Russia’s Gazprom and China’s CNPC, was built under a 30-year, $400 billion contract signed in May 2014. Construction took approximately five years, from 2014 to 2019, with gas deliveries ramping up steadily since.
PoS-1 has a design capacity of 38 billion cubic meters (bcm) of natural gas per year, equivalent to about 1.3 trillion cubic feet. In 2023, it delivered 22.7 bcm, exceeding contractual obligations, and is on track to reach its full capacity of 38 bcm by 2025. Currently, the pipeline pumps around 110 million cubic meters per day, a sharp increase from the 15 million cubic meters daily when it first came online. This reliable supply has made Russia China’s top gas supplier in recent years, surpassing competitors like Turkmenistan and Qatar.
However, PoS-1’s success comes with caveats. The pricing formula, tied to oil prices with a nine-month lag, has favored China, with gas prices averaging $297.30 per 1,000 cubic meters in 2023—significantly lower than the $500+ Russia once earned from European markets. This dynamic underscores China’s strong negotiating position, a factor that looms large in PoS-2 talks.
Power of Siberia 2: A New Artery for Russian Gas
The proposed Power of Siberia 2 pipeline is a far more ambitious project, designed to deliver 50 bcm of gas annually—equivalent to 1.8 trillion cubic feet—from Russia’s Yamal Peninsula in western Siberia to northern China via Mongolia. The 2,600-km pipeline (with 2,700 km in Russia alone, totaling roughly 6,700 km including Chinese sections) would nearly match the capacity of the now-defunct Nord Stream 1 pipeline to Europe. Gazprom aims to start construction as early as 2024, with gas deliveries targeted for 2030, suggesting a six-year timeline, though delays are possible given ongoing negotiations.
Unlike PoS-1, which taps eastern Siberian fields like Chayanda and Kovykta, PoS-2 will draw from Yamal’s vast reserves, previously destined for Europe. This shift is critical for Russia, which has seen its European gas exports plummet by over 80% since the 2022 Ukraine invasion. With PoS-1, PoS-2, and a smaller 10 bcm/year pipeline from Sakhalin (Power of Siberia 3) in the works, Russia aims to export nearly 100 bcm to China by 2030—still short of the 155 bcm it once supplied to Europe but a significant step toward offsetting losses.
The pipeline’s endpoint in China is expected to be in the industrialized northeast, likely near Beijing or Tianjin, regions with high energy demand. Unlike PoS-1, which serves China’s domestic market via the Heihe-Shanghai pipeline, PoS-2’s route through Mongolia introduces new possibilities for regional connectivity.
Can China Connect PoS-2 to Other Countries?
A key question is whether China could use PoS-2 as a hub to re-export Russian gas to other countries, creating a regional gas trading network. The pipeline’s Mongolian transit route, known as the Soyuz Vostok extension, complicates this prospect. Mongolia, heavily dependent on Russian energy (95% of its petroleum and 20% of its electricity), is primarily a transit country but has expressed interest in receiving gas for domestic use. This could reduce the volume available for onward export.
Within China, PoS-2’s gas could theoretically be integrated into existing pipeline networks, such as the West-East Gas Pipeline, which spans from Xinjiang to Shanghai. This network already connects to Central Asian gas supplies from Turkmenistan, Uzbekistan, and Kazakhstan via the Central Asia-China Gas Pipeline (CACGP). A fourth line (Line D) of the CACGP, expected to deliver 25 bcm annually from Turkmenistan by 2030, could complement PoS-2, giving China flexibility to blend Russian and Central Asian gas for domestic use or export.
However, exporting Russian gas to third countries faces significant hurdles. China’s priority is energy security for its own market, which consumed 394 bcm of gas in 2023 and is projected to grow to 600 bcm by 2040. Experts suggest China won’t need additional gas supplies until after 2030, reducing the urgency to build PoS-2 or re-export its gas. Moreover, China’s existing LNG import contracts (42 million tonnes per year from Qatar, the U.S., and others) and domestic production (210 bcm in 2023) provide ample supply, strengthening Beijing’s leverage in negotiations.
Potential export markets like South Korea or Japan would require costly LNG terminals or new pipelines across the Yellow Sea, which are not currently planned. Southeast Asian nations, such as Vietnam or Thailand, are geographically distant and rely heavily on LNG, making pipeline connections uneconomical. Central Asian countries, already supplying China via the CACGP, are unlikely buyers due to their own gas reserves and growing domestic demand. Thus, while technically feasible, re-exporting PoS-2 gas is not a near-term priority for China.
Trading Bloc Implications: A Russo-Chinese Energy Axis?
The PoS-2 pipeline carries profound implications for global energy trade and trading blocs, particularly within the context of Russia and China’s “no limits” partnership. For Russia, PoS-2 is an existential project. Gazprom, which posted a $6.8 billion loss in 2023—its first since 1999—sees PoS-2 as a lifeline to replace lost European revenues. The pipeline could generate $2.5–4.3 billion annually in resource rent, far less than the $20–30 billion earned from Europe pre-2022 but critical for Russia’s war-stressed economy.
For China, PoS-2 enhances energy security by diversifying away from LNG imports vulnerable to maritime choke points like the Malacca Strait. However, Beijing is wary of over-reliance on Russia, given Moscow’s history of weaponizing energy supplies in Europe. This caution is evident in China’s parallel pursuit of the CACGP Line D and LNG contracts, ensuring a balanced supplier portfolio.
The pipeline strengthens the Sino-Russian axis within frameworks like the Shanghai Cooperation Organization (SCO) and BRICS, where energy cooperation is a cornerstone. Mongolia’s role as a transit country could deepen its integration into this bloc, though its recent exclusion of PoS-2 from its 2024–2028 economic plan signals uncertainty. If built, PoS-2 could position China as a regional gas hub, giving it leverage over neighbors like Mongolia and potentially Kazakhstan or Uzbekistan, which are already tied to China’s energy network.
For other trading blocs, the implications are mixed. The European Union, now sourcing gas from the U.S., Qatar, and Norway, faces no direct threat from PoS-2 but loses leverage over Russia as Moscow diversifies markets. Australia and the U.S., major LNG exporters to China, could see softer demand if PoS-2 floods the market with cheaper pipeline gas, though China’s long-term contracts mitigate this risk. In Southeast Asia, nations outside China’s pipeline network may remain reliant on LNG, limiting PoS-2’s regional impact.
Challenges and Outlook
Despite its strategic importance, PoS-2 faces significant hurdles. Pricing remains a sticking point, with China demanding gas at near-domestic Russian prices ($60 per 1,000 cubic meters) while Gazprom seeks $350, closer to European levels. Financing is another issue, with China pushing to fund the Russian section on terms favoring its banks, potentially costing Russia $8–15 billion in repayments. Mongolia’s hesitation and environmental concerns over the pipeline’s route through sensitive ecosystems add further complexity.
Recent developments paint a mixed picture. In May 2025, Russia’s Energy Minister Sergei Tsivilev described talks as in an “active stage,” but no contract was signed during Chinese President Xi Jinping’s Moscow visit. Earlier optimism from Russian officials, including Deputy Prime Minister Alexander Novak, has been tempered by reports of stalled negotiations, with China leveraging its buyer’s market advantage.
Conclusion: A Pipeline to Watch
The Power of Siberia 2 pipeline is more than an energy project—it’s a geopolitical chess move. For Russia, it’s a lifeline to sustain its gas industry amid Western sanctions. For China, it’s a strategic asset to bolster energy security while maintaining negotiating dominance. While the pipeline’s 50 bcm capacity and northern Chinese endpoint hold potential for regional connectivity, China’s focus on domestic needs and alternative suppliers makes large-scale re-exports unlikely in the near term.
For energy markets and trading blocs, PoS-2 signals a strengthening Russo-Chinese energy axis, with ripple effects for LNG exporters and Eurasian geopolitics. Yet, with pricing disputes, financing challenges, and Mongolia’s indecision, the pipeline’s fate remains uncertain. As talks progress, Energy News Beat will keep you updated on whether PoS-2 becomes a reality or remains a pipe dream.
Sources: Reuters, Carnegie Endowment for International Peace, Center on Global Energy Policy at Columbia University, South China Morning Post, Financial Times, TRENDS Research & Advisory
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The post China and Russia Deepen Energy Ties with Power of Siberia 2 Pipeline Talks: A Game-Changer for Natural Gas Trade appeared first on Energy News Beat.
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