1 June 2011, 18:10

Russia, China step up oil & gas cooperation

Russia, China step up oil & gas cooperation

Russia and China have overcome all differences on oil supplies and agreed to sign a gas contract at a summit scheduled for June 10th. This is the main outcome of another Moscow round of the two sides’ energy dialogue.

Russia and China have overcome all differences on oil supplies and agreed to sign a gas contract at a summit scheduled for June 10th . This is the main outcome of another Moscow round of the two sides’ energy dialogue.

Russian Deputy Prime Minister Igor Sechin and Vice Premier of China’s State Council Zhang Dejiang clinched an agreement on tariffs for pumping oil though the Eastern Siberia-Pacific Ocean pipeline. Starting from January 1st this year, Russia has been supplying oil to China at market prices. In March, our Chinese partners unilaterally revised the tariff downwards and stopped paying extra for the pumped oil. As a result, the project’s operator Transneft announced an estimated $250-million loss.

The Chinese side at first refused to recognize that it violated contract obligations, compelling its Russian partners to put this issue high on the agenda of the Irkutsk meeting on May 24th, but the day before the talks China said its delegation wouldn’t come. Information appeared that the Russian operator, as well as the producer Rosneft, was even going to file a lawsuit. The parties, however, decided to settle it amicably, with China recognizing its debt and repaying most of it on May 31st .

After that, Russia’s Rosneft and the Chinese National Petroleum Corporation (CNPC) announced their intention to start building a new oil processing factory in Tianjin before the end of the year. The project’s investments are expected to reach $5 billion.

The sides also declared the expansion of their partnership in retail sales of petrochemicals, namely the establishment of a joint gas station network. Thus, cooperation will not only cover production and distribution of oil products but also their processing and sale.

Meanwhile, a major breakthrough at the Moscow talks was reached in the gas sphere. After many years of fruitless negotiations, Russia and China have finally coordinated the key terms of a long-term gas contract, Igor Sechin said:

"We are considering two gas supply routes for the next 30 years. The western route will provide China with 30 billion cubic meters of gas, the eastern one - with 38 billion. I do not think these are the final figures - they may increase in the course of cooperation," Igor Sechin said.

There will be no problems with financing either the western or the eastern corridors, Russian energy giant Gazprom assured. The first project to be implemented is going to be a pipeline from gas fields in Western Siberia to China, the construction of which may be launched as early as in the middle of the year.

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