China is set to become the biggest buyer of Russian oil in the coming years following the signing of a new major deal between the two countries.
Russia’s state major Rosneft inked an agreement with Sinopec, China’s largest refining state company, on Tuesday for the supply of 100 million tons of crude over the next 10 years. Earlier this year Rosneft signed a contract with Chinese state oil major, CNPC, to supply China with 365 million tonnes of oil over 25 years.
The deals, reached during a visit of Russian Prime Minister Dmitry Medvedev to China, will double Russian oil deliveries to China from the current 15 million tonnes a year to about 30 million tonnes over the next five years, making China No 1 importer of Russian crude. It will overtake Poland, which imports about 20 million tonnes of oil a year from Russia.
Novatek, Russia's largest private gas company reached a deal to supply 3 million tonnes of LNG to CNPC per year and signed an agreement for financing the construction of an LNG plant in a $20 billion project on the Arctic Yamal peninsula.
Gazprom, Russia’s state gas monopoly, reached an agreement on a price formula to supply 38 billion cubic metres per year of gas by pipeline to China. The two sides are yet to agree on final price terms.
The oil and gas deals are part of Russia’s strategic energy pivot to the East, as Russian exports to Europe are declining due to the continuing economic slump.
China, which gets 90 percent of its energy shipments from the Middle East along the potentially insecure sea routes, is also keen to source more energy resources from Russia.
Interestingly, the massive energy deals between Russia and China were clinched while Prime Minister Manmohan Singh was visiting the two countries. However, his visits were not marked by the conclusion of any major economic pacts either with Russia or China.