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Russia's Rosneft, China's CNPC in talks on upstream pact, deals possible by May: reports

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Russia's Rosneft, China's CNPC in talks on upstream pact, deals possible by May: reports


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Russia's state-owned Rosneft and China National Petroleum Corporation are in talks over upstream co-operation in Russia, including the Arctic and Far Eastern territories, and could reach concrete agreements by May, Rosneft CEO Igor Sechin was cited as saying late Thursday in Russian media reports.

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"We are now in talks with CNPC over upstream cooperation in Russia's onshore areas as well as offshore the [Far Eastern] Sakhalin island and the Arctic. We have agreed to form working groups [to discuss] the plans," said Sechin said.

He was speaking to Russian media in the resort city of Sochi ahead of the opening ceremony of the Winter Olympics to be held Friday.

"By this May ... I expect that opportunities will emerge to discuss new projects and sign new agreements," he said.

In May, Russia's President Vladimir Putin plans to visit China, Sechin said, reiterating earlier statements by Russian government officials.

Russia and China recently strengthened their cooperation in the energy sector, with Rosneft and CNPC signing a memorandum and understanding in October 2013 on an East Siberian and Russian Far Eastern joint venture.

Rosneft is to hold 51% in the JV, with CNPC holding the remaining 49%.

In June 2013, Rosneft and CNPC reached a second crude oil supply agreement that is to gradually double ESPO crude flows to China to 31 million mt/year (620,000 b/d) by 2018.

The 25-year agreement reached in June followed a 2009 deal, under which Rosneft is to supply 15 million mt/year of ESPO crude for 20 years, with the supplies starting in January 2011.

In October 2013, Rosneft also agreed to supply around 200,000 b/d of crude for 10 years to China's state-owned Sinopec, with deliveries starting this year.

Rosneft and Sinopec are already partners in the 120,000 b/d Udmurtneft upstream project in West Siberia, which they have operated jointly since 2006. GAZPROM'S CHINA DEAL EXPECTED IN MAY

Meanwhile, Putin's press secretary Dmitry Peskov was reported as saying in Sochi Thursday that by May, Russia's gas giant Gazprom expects to reach a long-awaited gas pricing agreement with CNPC, reiterating earlier statements from Gazprom.

Last last month, Gazprom said the pricing agreement was expected to be signed in May during Putin's visit to China, with the supply contract coming in force by the end of 2014 and actual supplies potentially starting in 2018.

In September 2013, Gazprom said it had signed a legally-binding deal with CNPC, setting out key conditions for future supplies from East Siberia, via the so-called eastern route.

This followed a memorandum of understanding between the two companies in March 2013 to start pipeline gas supplies to China in 2018, at a rate of 38 billion cubic meters/year. The MOU included a possible increase in volumes to as much as 60 Bcm/year.

--Dina Khrennikova,
--Edited by Deepa Vijiyasingam,