Russia, China resolve Tianjin refinery oil supply issue

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 2 -- Russia’s oil companies will supply most of the oil needed for a joint refinery project between China National Petroleum Corp., 51%, and Russia's Rosneft, 49%, according to a senior Chinese government official.

"The issue is resolved following friendly talks," said China's Energy Minister Zhang Guobao, who said Russia will supply 70% of the refinery’s oil, with the remaining 30% to be delivered from unidentified sources in Asia.

Zhang’s reference to “friendly talks” followed a recent meeting, when the two sides were still in disagreement over the supply of oil to the Chinese refinery project.

Last September, Rosneft and CNPC completed a feasibility study on building a 300,000 b/d refining and petrochemical complex valued at $3-4 billion in the northern Chinese city of Tianjin.

In July, however, the two sides were still at loggerheads over supplies for the project, with one Rosneft official saying that, “the crude supply is the most complicated issue” after China diverted an initial shipment of oil sent by Rosneft.

Rosneft hoped the initial supplies of crude would go to feed the Tianjin refinery but CNPC allocated the oil to its subsidiary plants in northeast China including a newly upgraded plant in Liaoyang to process exclusively Russian crude.

According to Russia’s Deputy Prime Minister Igor Sechin the talks were “substantive and thorough” and covered a range of topics, including the refinery and other matters.

The statements by Zhang and Sechin followed the launch of a 67-km pipeline spur to China from the current endpoint of Russia’s East Siberia Pacific Ocean (ESPO) pipeline.

The ESPO’s 2,757-km first stage runs from Taishet to Skovorodino, and the planned 2,100-km second stage will run from Skovorodino to Kozmino on Russia’s Pacific Coast.

The spur extends from Skovorodino to the border with China, marked by the Amur River, and eventually will be extended 1,000 km to China’s industrial city of Daqing.

Sechin said oil is already filling the Russian section of the spur and that the first contract will be concluded this year for oil supplies to China. He said a second contract will concluded for “a total quantity of 125 million tonnes annually.”

Last year, Russia accepted a $25 billion loan from China in exchange for future oil deliveries. Under the agreement, China will import 300,000 b/d of Russian oil for 20 years starting in 2011 (OGJ Online, Feb. 17, 2009).

Contact Eric Watkins at [email protected].