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Gazprom to receive $25 billion prepayment for gas supplies to China

Russian gas monopoly Gazprom will get $25 billion in prepayment from the Chinese National Petroleum Corporation (CNPC) to be allocated for the Sila Sibiri (Power of Siberia) pipeline under the gas supply deal, a source close to Gazprom told ITAR-TASS.

The amount is similar to the earlier announced cost of the pipeline with an annual capacity of up to 38 billion cubic metres.

Construction would start as soon as the contract is signed, said Gazprom's CEO Aleksey Miller. Gas should first be sold - this is the formula Gazprom had always stuck to, he said.

The companies signed the 30-year contract for gas supplies worth $40 billion to China via the eastern route pipeline on Wednesday.

Miller described the deal as Gazprom's so far major gas contract but declined to reveal the gas price referring to commercial confidentiality. The document granted the sides preferential tax regimes, he added.

Russian President Vladimir Putin told journalists in Shanghai works would start on the next day after the deal, as the sides would start to work on the western route for supplies from Western Siberia.

No strong growth in Gazprom stocks is to be expected over the short term as the contract with China had already been priced in. The gas holding's stocks have already rocketed more than 20% from the local low of 122.8 rubles ($3.559 exchange rate fixed at May 21) per stock on April 28 to 149 rubles ($4.3) on Tuesday.

[Source: Itar Tass, Moscow, 21May14]

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