Russia’s Rostec, China’s Shenhua to invest $10 bn in coal exploration

Sep 07, 2014 12:00 AM

Russian state company Russian Technologies, or Rostec, has signed a $10 billion deal with China’s state-owned Shenhua Group Corp Ltd, the largest producer of coal in the world, to develop coal deposits in Russia’s Siberia and the Far East..

According to the memorandum of understanding, signed by Sergey Chemezov, Rostec’s CEO, and Yuzhuo Zhang, the chairman of Shenhua Group Corporation, on September 4, the companies will explore and develop the Ogodzhinskoye coal deposit, located in the Amur Region.

Coal reserves at the mine are estimated to be 1.6 billion metric tons. Rostec expects coal production to start in 2019 with an annual output reaching 30 million tons. The commodity will be largely exported to the Asia-Pacific Region, mainly China.

Rostec and Shenhua will also build a marine coal terminal at Port Vera in the Primorsky Territory with annual capacity of 20 million tons. The construction is slated to begin in 2015 and Port Vera will be put into operation in 2018 – 2019.

“The project to construct Port Vera will help implement the development strategy for the Far East and the Russian coal industry. It will greatly expand the access of Russian coal companies to sales markets in the Asia-Pacific region,” said Andrey Korobov, CEO of RT Global Resources, a Rostec subsidiary, according to the statement issued by the Russian state company.

The project also involves constructing a power plant, high-voltage transmission lines to China, as well as social and transport infrastructure.

According to Chemezov, the project will help deal with the issue of power shortages in Russia's Amur Region and China's northern regions and meet the electricity demand of those territories. It is also expected to create around 10,000 new jobs and up to 30,000 jobs in related and associated industries.

“The cooperation with Shenhua is a comprehensive effort to broaden Russia’s energy business in Asia,” Chemezov explained. Korobov called Chinese companies professional partners that can be relied upon to help implement the most ambitious projects.

The Rostec-Shenhua deal comes at a time of increasing cooperation between Russia and China in the energy sphere.

In May, Russia's largest gas exporter Gazprom and China National Petroleum Corporation (CNPC) signed a historic 30-year agreement worth $400 billion to deliver gas to China.

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