Nord Stream 2 Lifts Chinese Shares, as Firms Set to Benefit from Major Pipeline

The completion of the Nord Stream 2, an undersea natural gas pipeline in the Baltic Sea that will greatly improve Russia’s capacity to transport gas to Germany, continued to drive up share prices of some Chinese energy companies on Tuesday, as some analysts said that companies investing in the Yamal Peninsula in the Arctic, one of the largest gas fields in the world, will benefit from the new pipeline.

Gazprom, the Russian natural gas giant, announced Friday that the Nord Stream 2 has been completed after five years of construction. Operation could begin before the end of this year, Reuters reported, citing Swiss-based Nord Stream 2 AG consortium.

The completion of the pipeline, which is seen by many as a geopolitical triumph for Russia and European importers of Russian gas, may have also shored up shares of Chinese companies investing in the area, analysts said.

The pipeline is expected to increase natural gas production from the Yamal Peninsula, where much of the gas destined for European markets is extracted. And analysts said this could benefit Chinese companies, which have a major investment portfolio in the region.

Shares of PetroChina, the listed arm of China National Petroleum Corp (CNPC), have risen by more than 10 percent on the Shanghai Stock Exchange since the announcement of the Nord Stream 2’s completion. PetroChina shares rose 3.82 percent on Tuesday, after hitting an intraday high of 8.91 percent.

CNPC has a 20-percent-stake in the Yamal LNG Project, China’s first overseas megaproject since the launch of the Belt and Road Initiative. Yamal LNG Project is owned by Russia’s No.2 natural gas producer Novatek. China’s Silk Road Fund and French energy firm Total also hold stakes in the project.

PetroChina is not the only Chinese company benefiting from the news of Nord Stream 2’s completion. Shanghai Zhenhua Heavy Industry Co, which built the Fortuna pipe-laying vessel that took part in the construction of the Nord Stream 2, saw its shares rise near to the daily limit of 10 percent on Monday.

Analysts said the completion of the pipeline, which paves the way for the pipeline’s operation, means natural gas output from the region will increase and Chinese investors stand to benefit from such an increase.

Mei Xinyu, a research fellow under the China’s Ministry of Commerce, wrote on his WeChat account that increased output means the overall cost of extraction will drop and this is good news for China, the world’s fastest-rising consumer of natural gas.

In the first half of 2021, China’s natural gas imports reached 59.82 million tons, up 23.8 percent from the corresponding period last year. The import value rose 9.5 percent to 136.24 billion yuan ($20.95 billion), according to official data.

Jin Lei, an associate professor at the Beijing-based China University of Petroleum, told the Global Times on Tuesday that the prospect of Russia directly supplying natural gas to Germany and other western European gas users and bypassing countries where there are disputes is a boon for the global oil and gas market.

On Saturday, Reuters reported that a US diplomat has assured Ukraine and Poland on mitigating the “threat” posed by the Nord Stream 2, but conceded that the project was already a reality.

The US has long opposed the Nord Stream 2 pipeline, which is seen as a game changer in the European energy landscape. Its efforts have been ignored by Germany.

“The receding danger of US’ unilateral sanctions also stand to benefit energy cooperation between China and Russia,” Jin said.

With bilateral ties at “best in history,” China and Russia are looking at boosting trade to $200 billion annually by 2024. Energy trade plays a vital role in China-Russia bilateral trade. Efforts were under way in the pre-investment phase in the so-called Power of Siberia 2 project which involves Russia, Mongolia and China, giving Russia additional routes to ship its natural gas to China.

About Parvin Faghfouri Azar

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