Russia invites China into oil business

Russia’s frozen tundra hasn’t been the most welcoming place for foreign travelers, and its onshore oil riches have always been state secrets. But when the Kremlin orders them to open up, people obey.

Last September, Russian President Vladimir Putin, who has sought new Asian markets for Russian energy exports to replace traditional customers in Europe, announced that he would welcome Chinese investment in Yankor, a vast new oil field in remote eastern Siberia owned by state firm Rosneft.

Since then, Chinese and Indian delegations have flown out to visit the field.

Some of the workers, who spend four weeks at a time at the isolated station – where temperature can fall as low as -76⁰F – have taken up Mandarin.

“We will work with the Chinese workers if need be.”

-Alexi Zyryanov, oil and gas production unit deputy head

All of Vankor’s 400,000 barrel per day output of crude oil is already shipped east via the East Siberia-Pacific Ocean pipeline, which includes a spur feeding into northeast China.

However, a proposed Chinese investment in a stake in the project would far further than Moscow has ever gone to luring Beijing into its hydrocarbon industry.

Moscow has rarely considered offering an ownership stake in such a big strategic onshore deposit to outsiders, despite decades of interest from the West. The offer is even more remarkable for going to China, a rival for decades.

Rosneft has reached a draft agreement to sell a 10 percent stake in Vankor to China, according to the company.

Pivot to Asia

The Kremlin has made much of its “pivot of Asia,” seeking new energy markets since Western governments imposed sanctions on Russia over last year’s Ukraine crisis.

Last year, China overtook Germany as Russia’s biggest buyer of crude oil, with Rosneft securing deals to boost supplies through the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

Other energy projects depending on Chinese demand have hit stumbling blocks. On Tuesday, a liquefied natural gas plant on the Pacific island of Sakhalin, intended to produce fuel for Asian export, got reported by Reuters as being delayed several years.

Last month, Reuters reported that a flagship project to build a new natural gas pipeline from new Siberian fields to eastern China may also be delayed.

Vankor is Russia’s largest oil discovery in nearly three decades, key to Russia’s policy to find and tap new regions, such as east Siberia, as western Siberia reserves, the heartland of Russian oil production, are depleting.

“It is a new Kuwait.”

-Alexander Cherepanov, Rosneft subsidiary Vankorneft’s chief engineer

Few inhabited places on Earth are as remote. It is an hour-long helicopter flight to the nearest airport, Igarka, and 1,750 miles from Moscow.

The share of oil and related products to Asia will double to 23 percent by 2035, according to the Energy Ministry, and the East Siberia-Pacific Ocean pipeline will grow to 80 million tons (1.6 million barrels daily) by 2020.

Source: Reuters

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Author: Andrew Okwuosah

I am a technology junkie with a love of writing. Follow me everywhere at about.me/andrewokwuosah

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