Wednesday, April 22, 2009
Sechin seals $25bn China loan-for-oil deal
04-21-2009 - Upstream OnLine - Moscow and Beijing today finalised a $25 billion deal under which Russia will supply China with oil for 20 years in exchange for loans to Russian state companies. A Russian Energy Ministry official told Reuters that an intergovernmental deal was signed this morning in Beijing by Russian Deputy Prime Minister Igor Sechin, who oversees the energy sector. China agreed last year to lend $10 billion to Russian oil pipeline monopoly Transneft and another $15 billion to state-run producer Rosneft in exchange for supplies of 300 million tonnes (1.1 billion barrels) of Russian oil over 20 years. Beijing has abundant cash that Moscow needs to access as it heads into its first recession in a decade. Some Russian companies are finding it difficult to repay loans and to borrow project finance on commercial markets. China, which has been working hard to win oil supplies from Africa and elsewhere to run its industries, will secure flows from its neighbour. Russia is seeking to diversify its exports away from the West and is targeting China as the main market for oil that will be extracted from a new generation of fields in East Siberia. Transneft and China National Petroleum Corporation agreed in October to build a spur to carry 15 million tonnes a year, or 300,000 barrels per day, between the countries' trunk pipelines. Over 20 years, this adds up to 300 million tonnes - enough to meet around 4% of China's current oil needs. Russian news agencies today quoted Sechin as saying the spur would be built next year. He added Chinese companies could get access to Russian oil fields, while Russian players would increase their presence in Chinese refining. He did not elaborate. "The experience we obtained when preparing this agreement can be used to boost co-operation in other energy spheres," Russian agencies quoted Sechin as saying. "We will boost co-operation in the natural gas, nuclear, power and coal industries," he added.