Rosneft, Transneft agree on China oil link expansion costs

Mon Oct 14, 2013 7:00am EDT

Related Topics

* Rosneft agreed to double oil supplies to China

* Transneft, Rosneft had disagreed on expansion costs

* Transneft to find financing, Rosneft to pay a special tariff - source

MOSCOW, Oct 14 (Reuters) - Rosneft and Transneft have agreed in principle to increase Russian oil supplies to China, the latter said on Monday - a relaxing of tensions between the two over pipeline network expansion costs.

Rosneft and Transneft CEOs Igor Sechin and Nikolai Tokarev, both close allies of President Vladimir Putin, have been at odds over the expansion of pipeline routes to Asian markets, including to China.

Rosneft's Sechin, who transformed Russia's state-controlled oil company into the world's largest listed firm by output in just a year, is building up supply contracts to back his multibillion-dollar spending on acquisitions.

Earlier this year, Rosneft agreed to double oil supplies to China, currently at 300,000 barrels per day, via the spur of the ESPO pipeline. The decision raised concerns over Russia's ability to maintain oil exports to Europe.

Under the agreement, Transneft will find the financing and build the infrastructure for the expansion of the ESPO spur, while Rosneft will share Transneft's costs by paying a special oil shipping tariff, different from the one it pays for ESPO as a whole, a Rosneft source said. Rosneft declined to comment.

Transneft spokesman Igor Dyomin told Reuters on Monday that the pipeline monopoly and Rosneft had agreed that the latter would take on the expansion costs of the ESPO spur to China. Transneft would find the financing for ESPO which runs to the Pacific Port of Kozmino.

In a statement released on Friday, both companies said that Sechin and Tokarev had signed an agreement to increase the capacity of the ESPO spur - known as Skovorodino-Mohe - to 20 million tonnes from 2015 and 30 million tonnes from 2018 from the current 15 million tonnes of oil shipped annually.

Traders expected Rosneft's export volumes to China to rise to 17 million tonnes in 2014 and to as much as 20 million by 2015, on a par with Germany, the top consumer of Russian oil to date. (Reporting by Katya Golubkova and Vladimir Soldatkin, Editing by Alessandra Prentice and William Hardy)

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