International:Russia & China in a whooping $270bn oil deal

Sechin (right) speaks with Japanese scientist Akira Yoshino during the Global Energy Prize awarding ceremony in St Petersburg, yesterday, with Russian scientist Vladimir Fortov (seated) attending. Vladimir Fortov and Yoshino were awarded a joint endowment of $ 1.1mn, one of the world’s most prestigious energy awards in recent years, for their respective work into lithium-ion rechargeable batteries and thermodynamics.

Russian oil giant Rosneft and Chinese state firm CNPC yesterday signed a $270bn deal to supply China with oil over 25 years, an agreement hailed by Russian President Vladimir Putin as “unprecedented”.

The agreement was signed by Rosneft chief executive Igor Sechin and CNPC head Zhou Jiping in the presence of Putin and visiting Chinese Vice Premier Zhang Gaoli.

“An estimated value of the contract in current market parameters is absolutely unprecedented — $270bn,” Putin told participants of the annual Saint Petersburg International Economic Forum.

Addressing chiefs of global energy companies like Eni, ExxonMobil and Statoil, Putin reiterated Russia’s plan to diversify its energy clients away from its traditional reliance on Europe.

Putin has made a priority of stabilising Russia’s sometimes prickly relations with its giant eastern neighbour at a time when its ties with the West are becoming ever more problematic.

Russia wants to diversify its base of energy customers away from Europe and is aware it has not fully exploited the colossal potential of the Chinese market.

“Essentially, this is a new era of co-operation which means that in our co-operation with our strategic partners we shift from purely raw supplies to full-fledged co-operation in the engineering and manufacturing sphere,” Putin said.

Top Putin ally Igor Sechin told reporters earlier that the deal would involve the delivery of more than 360mn tonnes of oil over 25 years with a total value of $270bn (€204bn).

Russia is slated to receive an upfront payment of some $60bn. Sechin said that deliveries could start as early as this year.

The initial agreement was reached during a visit to Moscow in March by Chinese President Xi Jinping, his first foreign visit after taking over from Hu Jintao as the country’s leader.

That agreement pledged to gradually triple the supply of Russian oil to China over the next 25 years from their current level of 15mn tonnes per year. Putin said that under the contract Russia will be sending up to 46mn tonnes of oil to China annually.

The oil in the $270bn deal would be delivered to China from the existing Eastern Siberia-Pacific Ocean (ESPO) oil pipeline that would pump the oil directly to the Chinese region of Mohe.

Among a host of other energy agreements signed in Saint Petersburg, CNPC and Russian independent gas producer Novatek signed a deal to send Russian liquified natural gas (LNG) to China.

Under the deal, CNPC will purchase 20% in the Russian Arctic project known as the Yamal LNG in which France’s Total has 20% and Novatek holds the rest. The project is scheduled to producing gas in 2016.

Rosneft also signed agreements with Eni, Exxon and Statoil on LNG supplies.

Putin said tapping into the potential of the Asia-Pacific markets would allow the country to liberalise LNG exports.

Moscow is also working to finalise a potentially huge gas deal with China but a commercial contract has so far proved elusive as talks have become mired in pricing disputes.