Russia, China: Rosneft seeks to boost its oil deal with China Energy

Russian oil major, Rosneft, plans to ramp up its oil supplies to China next year by 10 mln tonnes under a long-term contract with China Energy (CEFC), which will become a new shareholder of the Russian company by the end of 2017, tass news agency writes. However, it is unclear how Rosneft will be able to deliver this volume. All its pipelines are full and the company will apparently have to cut the sales of free oil at the Kozmino port or use a railway route through Mongolia. Andrey Polischuk from Raiffeisenbank told the paper that Rosneft may also buy oil from other producers. This is unlikely to be profitable, but will enable Rosneft to get an advance payment and secure a market niche, and also a chance to sign new contracts.

Experts told Vedomosti that Rosneft’s bet on China is the right move, although its high dependence on it is risky. China is a major market for many areas and it is difficult to offset this risk, head of the Asia-Pacific Program at the Carnegie Moscow Center Alexander Gabuyev said. However, Rosneft may take advantage of domestic rivalry between the state-owned China National Petroleum Corporation and CEFC Energy, a private trader. In the mid-term prospect, China will remain a major oil consumer, but there is also a risk that its consumption will decrease, Gabuyev said.

Nesterov told Vedomosti that China is Russia’s strategic partner and boosting Russian oil supplies there is a strategically important decision. “This will allow keeping China’s interest in trade and economic relations at the state level,” he said. Rosneft will also try to expand its presence on the markets of India, Indonesia, and Thailand, in an effort to diversify its supplies.




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