UPDATE 2-China rates on Russia oil loan 5.0-5.5 pct -source

Wed Feb 18, 2009 4:52am EST

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MOSCOW Feb 18 (Reuters) - Russian firms Rosneft (ROSN.MM) and Transneft have secured interest rates of 5.0-5.5 percent on their combined $25 billion loan from China secured by 20 years of oil supplies, a Russian government source said on Wednesday.

The two sides estimated the value of the deal at $160 billion, based on a long-term oil price forecast, the high-level government source, who spoke on condition of anonymity, told Reuters.

"This is an unprecedented success. The rate is pegged to LIBOR and the interest rate will fluctuate between 5.0 and 5.5 percent," he said.

China agreed on Tuesday to lend the money in exchange for the supply of 15 million tonnes of Russian oil over 20 years in the largest ever deal between the two states, which are seeking to cement energy ties. [ID:nLH444229]

State-controlled Rosneft, Russia's largest oil producer, will get $15 billion of the loan from China Development Bank and oil pipeline monopoly Transneft $10 billion.

Supplies of 15 million tonnes over 20 years translates into 300 million tonnes, which means the two sides are forecasting an oil price average of $72.76 per barrel, compared with the current price of $39 per barrel of Russia's main crude Urals URL-E URL-NWE-E.

"Five-and-a-half percent is pretty good for a facility with such a long duration and for such a vast amount of money," said Alex Fak, an analyst at Troika Dialog brokerage.

"But there's still a question mark over the exact price at which Rosneft will be selling crude."

China has abundant cash that Moscow needs to access as it heads into its first recession in a decade. Some Russian firms are finding it difficult to repay loans and to borrow project finance on commercial markets.

Russia, the world's second-largest oil exporter after Saudi Arabia, is seeking to diversify its exports away from the West and is targeting China as the main market for oil that will be extracted from the new generation of fields in East Siberia.

China, which is the world's No. 2 oil importer, has been working hard to win oil supplies from Africa and elsewhere to run its industries. The Russian deal should allow it to meet 4 percent of its current oil needs.

The agreement, originally planned for the end of 2008, did not come easily despite being blessed high up in government.

Talks stalled in November over disagreements about interest rates and state guarantees China sought from the Russian government. (Reporting by Moscow bureau, writing by Robin Paxton and Dmitry Zhdannikov, editing by James Jukwey and Sue Thomas)

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