Russia will ship China 46mn tonnes of oil a year, says CNPC

Reuters/Beijing

Russian state-run oil firm Rosneft will eventually export 46.1mn tonnes a year of oil to China in the single largest contract in China’s crude trade, CNPC said, or nearly a tenth of Russia’s current output.

China National Petroleum Corp, China’s top oil and gas producer, said on its website, news.cnpc.com.cn, yesterday that under the 25-year contract, supplies via the East Siberia-Pacific Ocean (Espo) pipeline will double to an expected 600,000 barrels per day by 2018.

The total of Rosneft’s exports eventually will amount to 922,000 bpd under a string of supply deals advanced last week as the company leads the Russian oil industry away from the weak and saturated markets of Europe.

Rosneft chief executive Igor Sechin, speaking in St Petersburg last week at Russia’s annual economic expo, put a dollar value of $270bn on the new supply arrangements.

Russia currently produces around 10.5mn barrels per day of crude oil, a volume that is unlikely to rise by much this decade as output declines from the core fields of West Siberia.

The main field that feeds the Espo pipeline, Vankor, is due to reach peak output of 500,000 barrels per day next year.

The initial deal with China would send new barrels from as-yet unlaunched fields in East Siberia, which by Rosneft’s reckoning contain 17.4bn barrels of oil and condensate resources that can be exported to Asia.

The first of Rosneft’s new East Siberian fields, Yurubcheno-Tokhomskoye, is scheduled to start producing in 2016.

President Vladimir Putin said Rosneft could receive up to $70bn in upfront payments for the oil.

“It is a great way to monetise the oil they have in the ground,” a source familiar with the terms of the deal said.

From January 1 next year, Rosneft will start sending China 140,000 bpd of crude oil via the Kazakh-China pipeline under a five-year agreement. Both contracts are extendable for five more years.

The Russian oil firm also pledged to supply 9.1mn tonnes of crude oil a year, or 182,000 bpd, to the planned Tianjin refinery in northern China, a joint investment with CNPC. There is no target date yet for the refinery to launch.