St. Petersburg, Russia —
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Russia and China should boost their energy cooperation, including increasing their oil trade, which could lead to the establishment of new benchmarks and raise the two countries' clout in the market, the head of Rosneft said Thursday.
"With oil production growth and respective increase in hydrocarbons trading, we'll be able to establish new marker blends and impact price setting," Rosneft CEO Igor Sechin said at the St Petersburg International Economic Forum, with Chinese President Xi Jinping in Moscow for a state visit with Russian President Vladimir Putin.
Russia remained China's top crude oil supplier in 2018, boosting shipments 20% year on year to 1.436 million b/d, according to Chinese customs data.
Sechin added that trading in the countries' currencies would give the ruble and the yuan greater status and reduce the risk of exposure to US sanctions by avoiding US dollar transactions. China and Russia have over the past year discussed a new cross-border direct payment system to facilitate trade using the yuan and ruble, as both nations have seen relations with the US fray.
Russia is currently subject to sanctions that limit access to Western financing and certain types of oil technology, and faces the prospect of further sanctions being imposed on its use of the dollar and extended limitations on Western companies' involvement in Russian energy projects. Chinese officials are grappling with a similar degree of uncertainty over how to cope with new tariffs, and prevent more being introduced in future.
CNPC Chairman Wang Yilin was in agreement with Sechin, saying that their countries would be promoting relations of "a new type," free from protectionism and aimed at geopolitical stability.
"Strengthening of energy cooperation is key to energy security and an open world economy. Oil and gas have always been the cornerstone of the development of bilateral relations," Wang said at the forum.
Sechin, a close ally of Russian President Vladimir Putin, said that Russia should look eastward for growth in its vital oil sector, with the Asia-Pacific region already the biggest consumer and net importer of hydrocarbons.
"Russia-China cooperation can become a significant force to stabilize energy markets," he said. "We can conduct a joint balanced energy policy, in our own interests and in the interests of our partners."
Sechin said his company is seeking to develop new production centers in East Siberia, the Arctic and the Far East to "allow us to hedge risks related to insufficient investments into the development of conventional oil reserves."
Russia's Arctic is among the regions that can become a driver of output growth, with Rosneft's resources in the area estimated at 2.6 billion mt. Those resources, which contain crude "of premium quality," require further exploration work, but preliminary estimates suggest output in the area could reach up to 100 million mt/year, or more than 2 million b/d, by 2030, Sechin said.
Russia's government is working on draft legislation to offer "special measures of state support for investment projects in the Arctic area," Sechin said.
Development of the Northern Sea Route that runs from Asia to Europe via the Arctic waters will also accelerate shipments from eastern Asia to Europe and reduce costs by 15%, he said, adding that the route is beneficial for China as well.
--Nadia Rodova, firstname.lastname@example.org
--Edited by Alisdair Bowles, email@example.com