(EnergyAsia, October 31 2013, Thursday) — Russian energy giants Rosneft and Gazprom again experienced sharply diverging fortunes in their latest round of talks to sell oil and gas to Chinese state-owned companies.
There was only joy for Rosneft as well as rising star Novatek, and further uncertainty for Gazprom at the end of last week’s visit to Beijing by Russian Prime Minister Dmitry Medvedev and a delegation that included several of his country’s senior oil and gas executives.
Mr Medvedev announced Rosneft had closed a US$85-billion deal to supply 200,000 b/d of crude oil to Sinopec for 10 years starting 2014, while Gazprom would have to continue with seemingly endless rounds of talks with China National Petroleum Corp (CNPC) for a natural gas supply agreement.
Importantly for debt-laden Rosneft, the Chinese agreed to prepay up to 30% of the crude purchases, giving the Russian firm a source of income to fund production and pipeline projects.
The agreement was signed by Rosneft president and chairman Igor Sechin and Sinopec chairman Fu Chengyu in the presence of Mr Medvedev and his Chinese counterpart, Li Keqiang.
“The agreement will help Rosneft arrange additional funding for exploration and production projects and construction of the necessary infrastructure,” Mr Sechin said.
Russia’s largest oil company also said it will team up with CNPC to build a 300,000 b/d refinery in the eastern Chinese city of Tianjin by 2020, adding to an earlier announcement that the two companies will explore and develop oilfields in eastern Siberia.
CNPC will hold a 51% stake in the Tianjin refinery project which will be largely supplied its feedstock by Rosneft, the 49% partner, who has been granted the rights for crude import, oil products export and sales by the Chinese government.
At an international summit in St Petersburg in June, Russia’s largest oil company announced it had secured a US$270 billion agreement to supply 300,000 b/d of crude oil to CNPC over a 25-year term. As part of its long-term plans, Rosneft aims to export up to one million b/d of crude oil to China.
Meanwhile, in Beijing last week, Gazprom still could not agree with CNPC on the final pricing terms for the annual supply of 38 billion cubic metres (bcm) of piped natural gas after a decade of negotiations.
The two companies had also ended their last meeting at the St Petersburg summit empty-handed with Gazprom completely eclipsed by Rosneft’s landmark deals with Chinese and other Asian companies.
There will be more grim news for Gazprom as independent Novatek is emerging as a serious challenger after signing a 15-year contract with CNPC for the annual supply of at least three million tonnes of liquefied natural gas (LNG). Moscow is expected to end Gazprom’s monopoly on export of Russian LNG next year.