Rosneft plans to sign $60bn oil deal with China

Russian state-controlled oil company Rosneft is planning to sign a deal to supply oil to China. The deal is worth approximately $60bn, according to Russian President Vladimir Putin.

Putin, during a meeting with Chinese Vice Premier Zhang Gaoli, said he anticipates a good relationship between Chinese and Russian gas companies Novatek and Gazprom.

The proposed deal is part of Rosneft’s promise to increase oil supplies to China, which the energy firm announced in March.

Rosneft head Igor Sechin said that oil supplies to China could be trebled. He identified pipelines in the east Siberian fields as the main source of output growth over the next five years.

However, the two main fields Vankor and Verkhnechonsk are close to reaching peak output. It will take a few years to launch major new fields in east Siberia, and new pipelines must be built also.

Nearly 50,000km of oil pipelines in Russia is concentrated in west Siberia, which runs towards Europe. The country started the first stage of the east Siberia-Pacific Ocean (ESPO) link to Skovorodino at the Chinese border in 2009.

In January 2011, Russia started an oil pipeline with a capacity to deliver 300,000 barrels per day to China.

Putin has suggested that Russian companies form energy deals with Asia, as Europe is trying to reduce imports of Russian oil and gas in the wake of the financial crisis.

In June 2011, Russia and China decided to maintain the oil price formula for Russian crude oil supplies to China through the ESPO pipeline, which is built and operated by Transneft.

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Image: Russian President Vladimir Putin. Photo: courtesy of Óðinn.