Rosneft is seeking to borrow up to $30bn from China in exchange for possibly doubling oil supplies, making Beijing the largest consumer of Russian oil and further diverting supplies away from Europe.
Four industry sources familiar with the situation told Reuters that Rosneft was in talks with Chinese state firm CNPC about the borrowing, which would echo a $25bn deal the two companies clinched last decade.
Back then, Rosneft and Russian pipeline monopoly Transneft borrowed money to help Rosneft acquire the assets of nationalised oil producer Yukos while agreeing to build a pipeline to supply China with 300,000 barrels per day for 15 years.
This time, Rosneft wants to borrow money as it is close to completing a $55bn acquisition of rival TNK-BP to become the world’s largest listed oil producer.
Russia’s leading oil company, controlled by the Kremlin, is considering ultimately doubling supplies to China, sources said.
“It can be a combination of delivery options. The strategic line is to increase supplies to China,” one source familiar with the situation said.
“The reason why China is willing to lend is simple. They sit on over $3tn in reserves and are looking to diversify their investments,” he added, referring to China’s foreign exchange reserves of $3.3tn.
Rosneft and CNPC declined comment.
The first loan-for-supply deal between the two companies connected directly for the first time the world’s largest energy producer and consumer.
It came after a number of energy disputes between Russia and its neighbours which cut gas and oil supplies to Europe several times, drawing criticism and calls from the European Union for diversification away from Russian energy resources.
Russian President Vladimir Putin retaliated by saying Moscow would divert more energy to Asia.
Since then Russia has been steadily increasing crude exports to Asia at the expense of deliveries to Europe with flows due to amount to around 15% of Russian oil exports this year via pipelines to China and to the Pacific coast.
Should deliveries to China double, the share of Russian exports to Asia will amount to over a fifth of overall exports by the world’s largest oil producer and the second largest exporter after Saudi Arabia.
Energy relations between Moscow and Beijing have been, however, complicated in the past by disputes over oil shipping tariffs along the existing pipeline.
They were ultimately resolved after Russia agreed to apply a discount on supplies. The head of Transneft, Nikolai Tokarev, said this week that deliveries to China would rise over time.
“We are neighbours and we need to develop ties, especially given that China has a crazy oil deficit,” he told business daily Kommersant. Sources said it would take time before a final deal was reached and differences over various delivery options were resolved.
Finding the needed oil resources will also be challenging as Russia is several years away from a fresh increase in output in East Siberia, the region closest to China.
Source: Caye Global News, Gulf Times/Reuters
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