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Russia and China Sign 10-Year US$80 Billion Oil Supply Agreement
February 16, 2022Posted by Russia BriefingRosneft and Gazprom both sign valuable oil and gas energy contracts with Beijing
Russia’s state-owned oil company Rosneft has signed a US$80 billion 10-year deal to supply China’s National Petroleum Corporation (CNPC) with 100 million metric tonnes of oil, or about 200,000 barrels a day.According to official state announcements, the oil will be shipped via Kazakhstan to refining plants in China’s Xinjiang Province, together with other exports of Russian crude oil to China.
According to Russia’s pipeline operator Transneft, Russian crude shipments via pipelines to China last year were 40 million metric tonnes – or about 800,000 barrels per day. The new agreement will not affect the 80 million metric tonnes per annum – 1.6 million barrels per day sent via a combination of the East Siberia-Pacific Ocean (ESPO) pipeline that moves oil directly to China, as well as from Russia’s Kozmino Port in the Russian Far East near the border with China.
China has also been negotiating with the Gulf Cooperation Council (GCC) over supplies from the Middle East and is working towards a Free Trade Agreement. The same is true of Russia, where China signed of a Free Trade Agreement with the Eurasian Economic Union in 2018, but where tariff reductions are yet to be agreed. China has also signed a 25-year cooperation agreement with Iran, with Russia also shortly to follow with a similar deal.
Rosneft is also a primary driver of the Northern Sea Passage which provides an Arctic Ocean route for delivery of oil and gas to China and as far away as India, where the first LNG shipments were sent using loans from the Silk Road Fund in early 2018. The Northern Sea Passage also continues West to Europe. Rosneft are building a huge facility at Siberia’s Taymyr peninsula, with the complete project costing US$135 billion, including two airports and fifteen ‘industry towns.’ Rosneft’s Arctic developments will eventually produce 100 million tonnes of oil per year, with 30 million tonnes of oil being sent from the Arctic along the Northern Sea Passage from 2022 to 2024 alone.
It is not the only major Russia-China energy deal to have been announced. Russia’s State Gas giant Gazprom signed a 10 billion cubic meters per year (bcm/y) deal last week to supply gas to CNPC, adding to another supply contract between the two companies signed in 2014 – a 30-year deal for 38 bcm per year to go from Russia to China. This is part of the ‘Power of Siberia’ pipeline project – managed on the Russian side by Gazprom and on the China side by CNPC – that was launched in December 2019 and sees gas arrive by pipelines from Kazakhstan and across China’s LNG network to supply housewives with gas for cooking as far east as Shanghai.
Gazprom is also developing ‘Power of Siberia 2’ – with shipments to China via Mongolia – that will increase gas supply to China by an additional 50 bcm per year.
This adds to the 50.5% increase year-on-year (year-on-year) in 2021 of Russia gas exports to China, with the volume being delivered by pipeline during 2021 increasing by 154.2% year-on-year to 7.54 million metric tonnes, according to January 2022 data from China’s General Administration of Customs.
The question to ask is why is the EU so concerned about the sustainability of Russian gas supplies, when Beijing – a far larger market with a population three times bigger – apparently isn’t? The answer is that with China no longer in the market for US oil and gas supplies, Washington needs to find export clients – with the Ukraine exercise an attempt to push Russia into an incursion with the US then able to justify sanctions – and the termination of the Russia-EU Nordstream2 project.
Russia and China Sign 10-Year US$80 Billion Oil Supply Agreement - Russia Briefing News
Rosneft and Gazprom both sign valuable oil and gas energy contracts with Beijing Russia’s state-owned oil company Rosneft has signed a US$80 billion 10-year deal to supply China’s National Petroleum Corporation (CNPC) with 100 million metric tonnes of oil, or about 200,000 barrels a day...
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