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Rosneft chief describes negotiations with Chinese partners as difficult

November 10, 2014, 21:56 UTC+3 MOSCOW
According to Rosneft CEO, it's almost impossible to gain unilateral advantage dealing with professional companies like CNPC, Sinopec and CNOOC
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Igor Sechin

Igor Sechin

© EPA/SERGEI ILNITSKY

MOSCOW, November 10 /TASS/. Rosneft’s negotiations with Chinese partners were difficult and their results were achieved due to compromises, the Russian oil company’s CEO Igor Sechin said in an interview with the state-run Rossiya 24 TV news channel on Monday.

“Rosneft and the China National Oil & Gas Exploration and Development Corporation affiliated with CNPC, signed a framework agreement on the purchase of a 10-percent stake in ZAO Vankorneft,” Sechin said.

Vankorneft is a sister enterprise of the NK Rosneft open joint-stock company. It was established in 2004 to explore the Vankorskoye oil and gas condensate deposit in the northern part of Eastern Siberia that Russia has opened and launched over the past 25 years.

Besides, Sechin took part in a meeting of the board of directors of the Chinese-Russian Eastern Petroleum Company (a joint venture set up by Rosneft and CNPC) in Beijing which approved a feasibility study for the construction of the oil processing section of the Tianjin oil refinery.

“The outcome of any talks is always a result of certain compromises and hard work to coordinate positions. It’s rare when one of the sides can gain unilateral advantages. But it is next to impossible when you are dealing with professional companies like CNPC, Sinopec, CNOOC, etc. We are all in the market and we know each other very well. Of course, the final outcome is always a result of compromises,” Sechin said.

“But I think that we have agreed on a market basis. The deal is a market one. Our advisers confirm that. But the negotiations were difficult,” Rosneft chief said. Asked whether he was satisfied with negotiations, Sechin replied “No.”

Members of the board of directors decided to optimize by the end of February 2015 an oil processing section of the Tianjin oil refinery with an annual capacity of 16 million tons of preliminary processed crude oil and a complex for the production of aromatic hydrocarbons with a capacity of 1.4 million tons a year. The board of directors also agreed that the feasibility study for the oil processing section of the Tianjin oil refinery should be finalized.

Infographics Altai gas pipeline Altai gas pipeline
Gazprom is in negotiations with China on supplying gas via the western route in the volume of 30 billion cubic meters per year and possibly increasing it later to 100 billion cubic meters per year. Infographics by TASS
In May 2014, Rosneft and CNPC adopted a schedule for the construction of the Tianjin oil refinery under which the plant should be commissioned late in 2019. Simultaneously, this document regulates deliveries of 9.1 million tons of raw products to the plant.

Cooperation between Rosneft and China's CNPC

Russian oil giant Rosneft and China National Petroleum Corporation (CNPC) last month agreed to develop their strategic partnership.

Current cooperation between Russia's Rosneft and China's CNPC includes Rosneft’s crude oil supplies to China under a long-term contract.

In 2009, Rosneft and Russia’s oil pipeline operator Transneft signed a contract with China’s CNPC on the delivery of 15 million tons of oil annually during 15 years. In turn, China disbursed a $15 billion loan to Rosneft and a $10 billion loan to Transneft.

First crude oil deliveries under the contract started in 2011. In June 2013, Rosneft signed another contract with CNPC on the delivery of 363 million tons of oil during 25 years (14.4 million tons annually).

Infographics Supplies of Russian natural gas to China Supplies of Russian natural gas to China
May 21, 2014, Gazprom and CNPC have signed a deal on gas supplies to China
Along with that, the joint venture Vostok-Energy established by Rosneft and CNPC is exploring and extracting hydrocarbons in the Irkutsk Region in East Siberia while the joint venture Vostok-Petrochemicals was set up to build the Tianjin refinery and sell refined oil products in China and on Asian markets.

Both companies are set to make an investment decision on the construction of the Tianjin refinery in March 2016. The refinery’s construction is expected to be completed by the end of 2019.

Rosneft and CNPC also intend to take efforts to develop LNG projects, including the potential supplies of Russian liquefied natural gas to China.

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