Russia looks east on oil

The Russian government is looking East for new energy export customers. China is the world's fastest growing economy and is an anchor consumer for Russian energy.

Russia connects Europe and Asia through its vast territories. And if relations with Europe are well established, the work is still progressing on laying the business foundations with China.

The Annual meeting to discuss energy issues, headed by Deputy Prime Minister Igor Sechin and his Chinese counterpart Wang Qishan produced three deals. The biggest among them was an agreement to build an oil refinery in the Tianjin province by a joint venture of Ronsneft and China National Petroleum Corp. The Deputy Prime Minister says this would require an initial investment of $5 billion.

“Today Rosneft and the Chinese National Oil Corporation have signed documents on a project in the oil refinery sector. Rosneft gets the opportunity to acquire up to 49% of the new joint venture -a refinery plant here in Tianjin – that’s why we’ve chosen it for this round of energy talks. This venture will be supplied with oil, up to 70% of which will be delivered from the Russian Federation and 30% from the global crude oil market.”

China is the fastest growing energy consumer in the world, overtaking the U.S. in July of this year. Russia wants to secure its place as a prime energy supplier to this rapidly expanding economy, but faces stiff competition from other Central Asian countries already supplying gas to China.

This project might symbolize Russia’s new role in China’s downstream market, with Rosneft being the first company to make such a significant progress among Russian companies in dealing with Chinese partner in energy sphere according to Rosneft CEO, Eduard Khudainatov.

“It’s a precedent for a Russian company to join the Chinese market. And Rosneft is one of the first to do that as a result of years of work and today’s signing proves that. Mostly we’ll use our own oil for the project. As you know we have a successful project Vostok Energy in the Irkutsk region and we’re still conducting geological exploration. We have good prospects. But that won’t be the only source. We’ll use resources of Chinese companies involved in the project.”

Oil, gas, atomic energy and coal – Russia and China promote energy cooperation in every sphere. The two nations have already signed a deal for Russia to supply 9 million tonnes of crude annually through a spur on the Siberian Pacific Ocean pipeline, plus an agreement to buy oil from the Russian port Kozmino. At the end of this week the focus will be on political relations as President Medvedev heads to Beijing and Shanghai for a state visit.