Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.

  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list

Rosneft approves changes to 300,000 b/d crude oil supply contract with China

Commodities | Coal | LNG | Natural Gas | Natural Gas (North American) | Oil | Crude Oil | Steel | Shipping | Coronavirus

Market Movers Americas, Aug 3-7: Brent-WTI spread at widest since May


Platts Market Data – Oil

Capital Markets | Commodities | Oil | Crude Oil | Refined Products | Fuel Oil | Gasoline | Jet Fuel | Naphtha | Marine Fuels | Equities | Financial Services | Banking | Non-banks | Private Markets

North American Crude Oil Summit, 3rd annual

Coal | Electric Power | Renewables | Natural Gas | Oil | Metals

FEATURE: East Africa, led by Rwanda, is 'frontier' for technology metals: mine developers

Rosneft approves changes to 300,000 b/d crude oil supply contract with China


The board of directors of Russia's Rosneft Tuesday approved changes tothe existing contract with China National Petroleum Corp on supplies of300,000 b/d of crude to China to resolve a longstanding price dispute,company spokesman Rustam Kazharov said Wednesday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The details of the changes will be announced on March 20, in line withthe information disclosure rules, he said declining to provide any furtherdetails on the issue.

Under the deal reached with CNPC, Rosneft and Transneft are to offer theChinese company a $1.50/barrel discount on crude shipments, effective from thestart of November 2011, a source familiar with the issue confirmed to Platts.

The price will continue to be based on FOB Kozmino, the source said.

In return, CNPC is to pay its outstanding debt of $134 millionaccumulated in early 2011 when the partners were locked into the pricedispute, a few months after the crude supplies started in January 2011.

In February 2009, Transneft, Rosneft, CNPC and China Development Banksigned an agreement under which the Russian companies are to supply 15million mt/year (300,000 b/d) of crude to China via the ESPO pipeline over 20years. In return, China's Development Bank offered Rosneft and Transneft20-year loans of $15 billion and $10 billion, respectively.

But in April 2011 it emerged that China was underpaying for the Russiancrude as it believed that the transportation cost to China via the offshootfrom Skovorodino, near the border with China, had to be lower than that fordeliveries to Kozmino, which is a longer route and includes railroadtransportation.

Russia calculated a single transportation cost of Rb1,815/mt ($7.79/b)for crude deliveries via the entire ESPO route, irrespective of whether thecrude goes through the offshoot of the main ESPO line to China or istransported to the port of Kozmino on Russia's Pacific coast.

After high-level government talks, in May 2011 China paid almost $200million, or around 75% of what Rosneft and Transneft claimed they were owedin debts that had accumulated since the beginning of the year because of thedispute.


The discount is estimated to cost Rosneft around $450,000/day or $3billion over the entire term of the 20-year contract.

Despite this, Rosneft considers the recent agreement with CNPC as "amajor victory" as the Chinese company was seeking a discount of $13/b, asource in the company said.

The political implications of the deal are more important as it removesuncertainty over the issue, analysts have said.

China wants to at least double its crude purchases from Russia and haseven said it is ready to take all of the ESPO volumes, representatives ofTransneft said earlier in the month.

So far, Rosneft is not in the talks over the possible increase in thevolumes, the source at Rosneft said.

Last week, the spokesman for Prime Minister Vladimir Putin, DmitryPeskov, told Platts he was "unaware of such talks on a governmental level."

Meanwhile, Rosneft is to supply at least 70% of Russian crude to a260,000 b/d refinery that Rosneft and CNPC plan to build near Tianjin innorthern China.

In late September 2010, the two companies signed an agreement to conductthe front-end engineering design study for the refinery and held agroundbreaking ceremony to mark the start of the construction.

At the time, Rosneft's CEO Eduard Khudainatov said the company's plannedsupplies to the refinery are likely to come above the existing contract.

The initial plan calls for the $5 billion refinery to be built by 2015.

The companies, however, are yet to agree on the final parameters of theassets and are also discussing possible construction of the petrochemicalcomplex "to improve the economy of the project," a source familiar with thetalks told Platts.

The partners are also considering the possibility of trading futureproducts both domestically in China and abroad, he added, providing nofurther details.

--Nadia Rodova,