MOSCOW - Officials involved in the Russian oil industry, and the country's
state treasury, breathed a sigh of relief as the Chinese and Russian
governments announced agreement on a revolutionary shift in future Russian
crude oil flows.
According to the announcement from Beijing last Tuesday, where Deputy Prime
Ministers Wang Qishan and Igor Sechin were meeting, China and Russia have
finally agreed on terms for a China Development Bank loan of US$25 billion to
Russian state oil exporter Rosneft and pipeline company Transneft to finance
crude oil shipments over a 20-year period of not less than 241,000
barrels per day (15 million tonnes per annum).
The fine-print of the financing and oil-supply deals have not been released.
However, the availability of $15 billion in 10-year finance for Rosneft and $10
billion to Transneft at a sub-market interest rate of around 6% will guarantee
China's priority for East Siberian crude oil deliveries for the foreseeable
future.
The loan and oil-supply agreements implement the inter-government memorandum of
understanding signed more than three months ago, on October 29, 2008. They are
the second major initiative between Beijing and Moscow, following the Chinese
financing in 2004 for Rosneft's acquisition of Yuganskneftegaz in exchange for
delivery of 48.4 million tonnes (194,000 barrels per day) between 2005 and
2010.
For China in the medium to long term, according to one Russian bank, the new
deal will "provide an impetus to massive development of Eastern Siberia" from
which China is best placed to benefit. "We believe that two options are
possible: greater [Chinese] access to the East Siberian fields (currently two
upstream projects via a joint venture with Rosneft) and the potential
transformation of East Siberian Pacific Ocean pipeline network into a joint
stock company, with China getting 49% or 50% control in it."
If the latter materializes, that would give Beijing a control stake in an oil
port to be built at Kozmino Bay, near Nakhodka, on the Sea of Japan.
Reporting the loan as one of the largest in Russian credit history, a Moscow
newspaper speculated that in financing the new Russian oil source, "China will
reduce its dependence on deliveries of oil from the Persian Gulf, which
currently comprise about 80% of China's oil imports."
The enormous size of the loan also adds to the strategic influence Beijing will
have on the development of the Russian economy in the short term. According to
Victor Mishnyakov, oil analyst at Uralsib Bank in Moscow, "We think that the
development should offer support for the rouble and underlines our expectations
that the devaluation of the rouble is over if crude prices remain at their
current level throughout the year."
Troika Dialog Bank analyst Yevgeny Gavrilenkov reported, "For the balance of
payments, this is really positive news," while Mikhail Galkin of MDM Bank
commented that it was "a super-favorable loan for Russia".
At least $9 billion of Rosneft’s debt, due to be refinanced or settled this
year, can now be covered.
Transneft will use part of the money to complete the first stage of its East
Siberian Pacific Ocean (ESPO) pipeline for overland oil shipments to China, via
Skorovodino to Daqing, due to start next year; and to extend the second stage
of the ESPO pipeline to Kozmino Bay with additional capacity to ship up to 1
million barrels per day (50 million tonnes per annum). Transneft was saying
last month that lack of finance would force postponement of commissioning of
this new Asian oil outlet until 2013.
China's undertaking means that new Russian oilfields, such as Rosneft's Vankor
field in central Siberia, will move oil eastwards to Asian markets, rather than
westwards to Europe. This geostrategic shift of Russian energy flow has been a
Chinese objective for years. Last week's signing defeats a similar objective
pursued by the Japanese government, which has also been lobbying the Kremlin
with promises of financing for the ESPO pipeline to the sea.
John Helmer has been a Moscow-based correspondent since 1989,
specializing in the coverage of Russian business.
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