Lure of new energy spurs joint expansion

The Russian energy conglomerate En+ Group says it plans to actively expand its business with new projects in Eastern Siberia with its Chinese partners, and is hoping to become one of the biggest suppliers of energy to China. Artem Volynets, CEO of En+ Group, says Russia has the potential to become a valued supplier of commodities to China, the world's biggest energy consumer.

"Currently the key suppliers of resources to China are Australia, Brazil and South Africa," says Volynets. "We believe that Eastern Siberia has the potential to become a major, reliable supplier of commodities to the rapidly growing Asian markets and especially to China."

In June, En+ Group's subsidiary EuroSibEnergo signed a framework agreement with China Yangtze Power Co Ltd that provides for joint investment in a number of power plant construction projects in Eastern Siberia. The Russian company also recently signed a $5 billion (3.5 billion euros) agreement with Export-Import Bank of China to develop mining and power projects in Eastern Siberia.

"Siberian resources are the closest to China and that is obviously our key advantage," says Volynets, adding that the company plans to build up as much as 10 gigawatts of new power capacity in Eastern Siberia, mostly hydropower, during the next decade.

Compared with delivering commodities from countries such as Brazil, South Africa and Australia to China, which often takes between 14 and 35 days, it only takes one day to deliver goods by rail from Eastern Siberia through Mongolia, Volynets says.

He also says that carbon-free energy from Siberian hydropower plants can provide a substitute for the "dirty" energy from the coal-fired plants in use in China.

China's rapid economic growth during the past decade saw it overtake the United States to become the world's biggest energy consumer last year, accounting for 20.3 percent of global demand, according to a report by the oil company BP PLC. The report also says that China is by far the world's largest consumer of coal, accounting for 48 percent of global usage. China's consumption rose by 11.2 percent last year, according to the report.

Analysts expect China to continue both its rapid growth and the process of urbanization, as an estimated more than 250 million people from rural areas will move into cities in the next few decades.

The value of trade between China and Russia rose to $55.4 billion in 2010 from $10.3 billion in 2001, according to China's Ministry of Commerce. However, about half of Russia's trade at present is conducted with other European countries. Trade with China accounts for about 10 percent of Russia's total, and the two countries have pledged to increase bilateral trade to an annual value of $200 billion by 2020.

In July, the Russian energy giant Gazprom OAO and China National Petroleum Corp were unable to agree on a price for gas deliveries from Russia to China. An agreement would see Gazprom deliver as much as 68 billion cubic meters of gas over a period of 30 years, and the company has said that the two sides are still working to finalize a deal.

Volynets says China has become the global center of energy consumption. He said it is a strategic move for En+ Group to focus on expanding into Asia by developing new projects in the power and metals industries, in addition to coal, uranium, gold and iron ore mining.