Russia, China boost strategic partnership in oil and gas sector / News / News agency Inforos
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Russia, China boost strategic partnership in oil and gas sector

Rosneft’s exports to China exceeded supplies to Europe in some months of 2018

04.12.2018 16:21 Alexander Pasechnik, head of the analytical department, the National Energy Security Fund

Russia, China boost strategic partnership in oil and gas sector

On November 29, Beijing hosted the first Russian-Chinese Energy Business Forum, which was attended by representatives of about 90 energy, financial and IT companies, and also politicians, public figures, diplomats and experts from the two countries. The event included a number of industry-related roundtables. The format had been created in July 2018, in accordance with an assignment issued by Russian President Vladimir Putin and his Chinese counterpart Xi Jinping.

The Russian leader sent a greeting address to the forum’s participants, which was read at the opening ceremony by Rosneft’s CEO Igor Sechin. “The strategic partnership between Russia and China is on the rise, and energy cooperation, which has recently made a significant progress, is a crucial component of these relations,” it said.

The forum’s participants discussed the opportunities for expanding bilateral energy cooperation in various areas. They adopted a joint final statement, listing their common goals: creating a favorable investment climate; exchanging cooperation proposals on the most promising projects; sourcing investment for joint projects; creating necessary conditions for developing the scientific and technological potential; drafting proposals on enhancing industry policies and mechanisms of bilateral energy cooperation.

Russian companies signed a number of cooperation agreements with Chinese partners on the sidelines of the forum. Notably, state-owned Rosneft announced plans to set up a joint venture with Beijing Gas, which will get a 45% stake. The parties agreed to build about 170 gas-filling stations in Russia and to look into use of liquefied natural gas (LNG) as motor fuel.

Rosneft also entered into an agreement with Hengli Group. The document envisages potential cooperation in promising projects of hydrocarbon exploration and production, oil refining and petrochemistry in Russia and China, and also trading in oil and petrochemicals. In addition, the parties intend to establish a working group to coordinate their efforts; it will analyze potential projects and assess their commercial efficiency.

The strategic bet on developing energy cooperation between Russia and China is brought about by current trends: the bulk of mineral fuel consumption growth is now coming from Southeast Asia. And China is the most indicative, promising and capacious market of the region, shaping its energy demand. Moreover, it is important for Russia to continue diversifying its hydrocarbon exports between the West and the East. This model is optimal for its national energy strategy, since it mitigates certain political risks: the pressure put on the country by US and EU sanctions is not subsiding, after all.

Some conclusive results have already been achieved in the oil sector: Rosneft’s exports to China exceeded its shipments to Europe in some months of 2018. In the third quarter, the company exported 15.7 million tons of crude to Asia and only 13.1 million to Europe, according to its Q3 financial statement released in early November. And China is Rosneft’s main counterparty in Asia Pacific, with China National Petroleum Corporation (CNPC) being the major buyer of Russian crude under three long-term contracts.

The corporate contracts portfolio will now grow even bigger. On November 29, Rosneft and China National Chemical Corporation (ChemChina) signed a contract for oil supply on the sidelines of the business forum. It envisages delivery of up to 2.4 million tons of ESPO oil during a year via the port of Kozmino.

At the end of 2019, Gazprom is scheduled to start supplying gas to China via the Power of Siberia pipeline. The state-owned gas giant now expects to increase amounts carried by the pipeline to 48 billion cu m annually, up from the initially planned 38 billion. Yet its CEO Alexey Miller did not attend the energy forum, sending his deputy Alexander Medvedev instead.

The forum will be an annual event, and will be hosted by Russia in 2019.

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