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Wrap: Energy in the spotlight on Day 1 of Putin China visit

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Energy dominated the first day of Vladimir Putin's visit to China, as the Russian leader pledged to complement already substantial oil deliveries to Russia's energy-hungry neighbor with massive supplies of natural gas from Siberia, and the two countries agreed to continue cooperation in the nuclear industry.

MOSCOW, March 21 (RIA Novosti) - Energy dominated the first day of Vladimir Putin's visit to China, as the Russian leader pledged to complement already substantial oil deliveries to Russia's energy-hungry neighbor with massive supplies of natural gas from Siberia, and the two countries agreed to continue cooperation in the nuclear industry.

Президент РФ Владимир Путин и председатель КНР Ху ЦзиньтаоWith China a major consumer of Russian oil, energy was expected to be at the forefront of talks after Putin arrived in Beijing on a two-day visit, and a joint declaration signed by Putin and his Chinese counterpart Hu Jianto confirmed that the two nations were willing to continue cooperation in this sphere.

But it was the Russian president's pledge to export up to an annual 80 billion cubic meters of natural gas that stole the attention of the assembled press at a news conference.

Russia is already a major supplier of crude to the world's second largest consumer, but gas supply routes from Siberia to the Chinese cities of Daqin and Shanshan remain on the drawing board, as does another route from the offshore Sakhalin energy project to the northeastern city of Harbin, even though China is seeking to double the share of gas in its total primary energy supply to 6% by 2010.

Putin said the gas would come from two projects, and would require the construction of a new pipeline, which he said had been given the working name Altai.

"We also know the delivery volumes - 30-40 billion cubic meters of gas a year on each project," he said, adding that both East and West Siberia had enough resources to cope.

In fact, Russia has proven natural gas reserves of 47 trillion cu m, the world's largest, dwarfing China's 1.5 trillion, which means it is poised to play a key role in the People's Republic's bid to diversify its energy supply away from its copious supplies of coal in the next few decades.

A source in the Russian delegation later said that a $10-billion pipeline could be commissioned in 2011, adding that investment would not pose a problem.

"A project is profitable if it is economically viable," the source said. "This is a key condition for implementation."

He also said Russian energy giant Gazprom had agreed on a price formula for gas deliveries with its Chinese partners, without giving details.

The source said the project was crucial for Russia's energy security in the country's search for reliable customers, and that Russia would fulfill all delivery commitments given to European consumers, echoing Владимир Путинcomments made by Putin at the news conference that contractual obligations would be honored as Russia sought to diversify its energy exports.

"The Russian side will, undoubtedly, fulfill its obligations on all agreements, which were reached earlier with both Western and Asian partners," Putin said.

The two nations, as anticipated, agreed to advance oil projects, as well, as China's demand is expected to increase by 5-7% a year.

"The sides support the investment role of enterprises in both countries to develop oil and gas resources and expand the energy potential of Russia and China, and also other forms of mutually advantageous cooperation, including oil and gas refining, petroleum and gas chemistry, and the expansion of machine building plants for the energy industry's needs," the presidential declaration said.

Deputy Prime Minister Alexander Zhukov said during a visit to China last November that Russia would seek to almost triple its crude deliveries from 2004 to its rapidly developing neighbor to reach 15 million metric tons (301,232 bbl/d) in 2006.

Russia's mooted $11.5-bln dollar pipeline from East Siberia to the Pacific is one of the most important projects in this area and should pump 1.6 million of bbl/d for deliveries to Japan and energy-hungry China, but has been dogged by controversy due to the proximity of its route to Lake Baikal, the world's largest freshwater body. Officially given the green light by Prime Minister Mikhail Fradkov in 2004, environmentalists are still seeking a revision to the route, claiming any accident could cause irreparable damage.

However, the presidential declaration pledged to back cooperation in the oil sphere, as it also did for nuclear power.

Putin said Russia intended to continue building new nuclear energy facilities in China. Two Russian plants are currently being constructed as part of a $3.2-billion project, and the first is expected to go on line this year.

"Energy cooperation between Russia and China is not confined to energy supplies but also includes imports of Russian equipment and nuclear power," Putin said.

Meanwhile, behind the presidential scenes, Russia's electricity monopoly said it had signed an agreement with China to carry out a feasibility study for energy supplies to the Asian giant.

Anatoly Chubais, the chief of Unified Energy System, and Liu Zhenya, general director of Chinese State Power Grid Corporation, were reported to have signed a document saying the companies intend to finalize a long-term deal on energy supplies, including extensive construction of power-generating facilities in Russia and Высоковольтные линии электропередач.power grids in China.

The companies agreed on the basic price of supplies, which will determine export prices.

Under the agreement, a joint working group will be set up to carry out a feasibility study on annual exports of 60 billion kWh from Russia to China.

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