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Not impacted by sanctions, Russia, China ink Siberian exploration deal

Rosneft and CEFC also sign a contract for the supply of Russian crude oil

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Russian oil giant Rosneft and CEFC China Energy Company Limited signed a Strategic Cooperation Agreement to develop projects in Western and Eastern Siberia and a contract for the supply of Russian crude oil, Rosneft said.

Rosneft CEO Igor Sechin and CEFC China President Chan Chauto signed the documents at the 9th BRICS summit, Rosneft said in a press release on September 3.

The Strategic Cooperation Agreement suggests developing joint exploration and production projects in Western and Eastern Siberia and represents an evidence of an integrated approach of the Chinese corporation to its cooperation with Rosneft, the Russian oil company said, adding that the agreement also provides for a joint activity in such areas as refining, petrochemicals and crude and product trading.

Kirill Tachennikov, senior oil and gas analyst at BCS Global Markets in Moscow, told New Europe on September 5 that “East Siberian projects are capital intensive due to investments in infrastructure, and Rosneft having significant debt burden is interested in sharing capex with foreign investors not impacted by sanctions”.

Rosneft and its CEO Igor Sechin, are subject to sanctions imposed after Russia’s annexation of Crimea from Ukraine in 2014 and Russia’s involvement in Eastern Ukraine. The sanctions have affected Rosneft’s ability to borrow abroad. The United States imposed new sanctions on Russia in July, which were in part a response to conclusions by US intelligence agencies that Moscow meddled in the 2016 US presidential election.

However, Tachennikov explained that for the main projects Rosneft has already sold part of stakes to Chinese investors last year. “This time CEFC is in talks about buying a stake in the company’s retail and distribution business, which Rosneft wants to extract into separate entity and develop jointly with foreign partner. Probably oil supply contract is used to secure interests of the potential buyer,” the senior oil and gas analyst at BCS told New Europe.

In addition, at the BRICS summit Rosneft and CEFC signed a contract for the supply of Russian crude oil, opening up new opportunities for the strategic partnership, Rosneft said, adding that this contract will lead to an increase in direct supplies of crude oil to the strategic Chinese market and ensure a guaranteed cost-efficient export channel for Rosneft’s crude sales. The agreements are subject to Rosneft’s corporate approvals.

“We continue our work on strengthening the relationship with our strategic partners, including certainly CEFC, the largest Chinese private energy company, aiming for a long-term cooperation in all the areas of Rosneft’s business activity,” Sechin said. “The agreements signed today fully reflect the Company’s strategy, which priorities includes strengthening the relations with the Asia Pacific countries and, in particular, with China,” the Rosneft CEO added.

For his part, Chan said he is convinced that the Russian oil and gas sector has “a tremendous potential” and interested in an integrated cooperation with Rosneft. “We will use our trading capability and build up the supply of Russian crude to the fast-growing Chinese market. In addition, we are planning joint investments in the strategically important projects in the Russian oil and gas sector,” he said.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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