China welcomes the idea of Russian oil and gas

Nov 23, 2002 01:00 AM

Russian oilmen have found an equivalent to their “great and bright dream” about hydrocarbon supplies to the US. The US is far, the transportation costs much, while US businessmen do not hasten to sign contracts and make investments in Russian industry.
Meanwhile, dynamically developing China is at a stone’s throw. And Russia’s cheap oil and gas are needed there. Moreover, it is very suitable to export hydrocarbon from there to other countries of South East Asia. And everything seems to go well. The Chinese are welcoming this idea. Other Asiatic also wait for Russian oil. And the main thing is that soon Chinese oil industry will be liberalized.

The Chinese government decided to approve technical and economical substantiation of the project to build an oil pipe line from Russia to China (Angarsk-Datsin) and to permit to realize it by the end of 2002. At least, the Russian Ministry of Economical and Industrial Development was informed so. And this while oil company Yukos (the main Russian investor of the project) said the possible date of the contract signing would be about next December.
In September, Russian Deputy Minister of Energy Vladimir Milov said that the project of Angarsk-Datsin oil pipeline would be, beyond doubt, be realized fist of all. In comparison with all other projects, this one is the most prepared, the Deputy Minister stated. And it is understandable. In the project, technical details are worked out well and the financing scheme is clear. At least, it is clear who pays.

As the first stage of the project, the pipeline will link the city of Irkutsk with north-eastern China, while afterwards it will reach Chinese eastern harbours. From there, Russian oil will be without difficulty exported to other countries of South East Asia, which now are very interested in the building.
As expected, already in 2005, the pipeline will be put into effect in experimental regime. Yukos intends to invest $ 1.5 bn in the 1500 km-long Russian part of the pipeline, while PetroChina will invest about $ 500 mm in the 760 km-long Chinese part. By 2005, the transportation volume will make 20 mm tpy, while since 2010, it should increase till 30 mm tons.

Till now, oil co-operation between Russian and China had a state character. There are three state oil companies in China: Chinese National Oil and Gas Company, Sinopec and National Oil Off-Shore Company. Although the first company’s 4 % of share belong to British Petroleum, while Sinopec co-operates with Shell and ExxonMobil, foreign capital still could not develop in China.
However, next year, great changes expect the Chinese oil industry. In 2003, Chinese authorities will permit foreigners to organize joint petroleum refining firms. In 2004, they will be permitted to have over 50 % of share in such firms, while from 2005, foreigners will be allowed to fully control petroleum refining. So Russian oligarchs cannot miss such an opportunity.

Yukos, Transportneft and Stroitransgaz have already started to take root in China. They participated in a recent international oil exhibition and carried out some non-official talks. However, as for official talks, nothing was carried out. Something was said by Sibneft about possible expansion of the Chinese oil market, though they at once fell into silence. It is not the time.
Everything it clear within the Chinese petroleum refining industry. But the Chinese hardly can be without foreign partners in their own oil extraction, while the growing economy demands more and more oil. This year, China had to buy 70 mm tons oil for its own needs. Experts are sure, by 2005, it will be necessary to buy already 100 mm tons. In other words, oil requirement grows by 5 %, while only 1 % of the 5 could be satisfied with national efforts.

Yukos is convinced Russian oilmen cannot afford to miss this opportunity. If it is not Russians who will come to China, then the place will be occupied by somebody else. According to Yukos, only British Petroleum invests $ 4.5 bn in China. And others? On the threshold of the Yukos rush to the East, the company considers different variants of oil export to China. For example, oil supply by the railway through Mongolia.
This year, Chinese National Oil and Gas company will supply, through this way, about 750,000-800,000 tons of oil, while Sinopec will supply about 800,000-900,000 tons. In 2005, though this way, 3 bn tons oil will be supplied from Russia. The oil is supplied now to Shitszyachzhuan Petroleum Refining Work. At the same time, Yukos seems not to intend to participate in the oil industry privatisation.

According to the experts, the Russian oil companies’ methods in China are “tracing” methods of the “Iraqi strategy.” Though, in contrast to Iraq -- where Russians hardly will get something because of US ambitions -- in China, western oil companies so far do not expect any danger from Russian potential competitors and this is why probably they do not make efforts to influence the events.
So, Russian oil capital scouring about the world with a bag of oil dollars looking for some profit seems to have chances to really get registered in China.

Source: Pravda.RU
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