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Transneft hopes for payment of China’s oil debts within 2-3 weeks

October 25, 2011, 20:03 UTC+3
Currently, China’s oil debt is estimated at 75 million U.S. dollars and 700,000 U.S. dollars of penalties and fines to Transneft
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MOSCOW, October 25 (Itar-Tass) —— The Transneft Company hopes that China will repay its debts for the supplied oil within the next two or three weeks, the expert portal Eastern Pipeline said on Tuesday, quoting Transneft president Nikolai Tokarev as saying.

Currently, China’s oil debt is estimated at 75 million U.S. dollars (debts to Transneft and Rosneft) and 700,000 U.S. dollars of penalties and fines to Transneft, he said.

According to earlier reports, the Russian company started commercial supplies of oil to China through the ESPO (East Siberia – Pacific Ocean) pipeline on January 1, 2011. The stretch of the oil pipeline runs from Russia’s Skovorodino town to the oil refinery in Daqing (Heilongjiang province) via the border-located Mohe.

The 64-kilometre-long oil pipeline section from Skovorodino to the Amur River on Russia-China border was built by Transneft and the 992-kilometre-long section from the Russian-Chinese border to Daqing was built by the China National Petroleum Corporation. It was completed in September 2010.

The Russian section of the oil pipeline was commissioned on August 29, 2010, while the Chinese sector was completed on September 27, 2010.

The Russian-Chinese intergovernmental agreement envisages the sides will carry out oil supplies in compliance with the contracts signed between Russia’s Rosneft and Transneft companies and China National Petroleum Corporation (CNPC).

The documents envisions that Russia will supply 15 million tonnes of oil a year for 20 years.

In 2011, a dispute arose over payments for oil supplies through the pipeline. While Transneft has charged CNPC with violating their supply contract, CNPC is not acknowledging these claims.

The contract stipulates the monthly volumes of oil according to the agreed price formula, which is less than the spot price of oil.

Proceeding from the contract signed in February 2009, CNPC should pay 555.3 million U.S. dollars for the supply of 1.25 million tonnes of oil from Russia. However, China paid only 516.9 million U.S. dollars, or seven percent less than it was signed in the intially signed document.

In May 2011, China paid a part of its debt to Russian companies.

During visit of Russian Prime Minister Vladimir Putin to China on October 11, Moscow and Beijing managed to achieve a common stance pertaining to the price of oil, which Russia supplies to China through the ESPO pipeline.

In the words of Chinese Prime Minister Wen Jiabao, the sides reached utmost unity of views on the price for oil pumping through the Russian-Chinese oil pipeline.

Russian Deputy Prime Minister Igor Sechin added that the related accords would be formalised as addenda to the contracts. “The issue has been resolved, the agreements that had been reached makes it possible to withdraw it from the agenda,” he said.

He expressed confidence that the debts will be repaid in compliance with the documents, which would be signed by the Russian and Chinese partners of this cooperation.

Rosneft is the leader of Russia’s petroleum industry, and ranks among the world’s top publicly traded oil and gas companies. The company is primarily engaged in exploration and production of hydrocarbons, production of petroleum products and petrochemicals, and marketing of outputs.

Transneft is a Russian state-owned business responsible for the national oil pipelines. It owns the largest oil pipeline system in the world, with a total network length of almost 50,000 kilometres. Transneft transports about 93 percent of the oil produced in Russia.


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