China and Russia to launch energy talks

BEIJING (Reuters) - China and Russia will launch high-level talks aimed at encouraging energy cooperation between the two giant neighbors, the Chinese government said on Thursday, after years of frustrated deal-making over oil and gas.

Chinese Foreign Ministry spokesman Liu Jianchao said Russian Deputy Prime Minister Igor Sechin would visit China on July 26-27 for talks with Vice Premier Wang Qishan.

Liu called the launch of the two nations' vice premier-level "energy negotiations mechanism" an important step that would help them "jointly plan energy cooperation."

But talks between Russia, with its abundant reserves of oil and gas, and China, with its constant thirst for steady energy supplies, have yielded limited progress so far, largely because the two heavyweights disagree on pricing.

China believes access to its vast markets, which will help Russia diversify away from Western customers, should win it a steep discount on fuel prices. Moscow is not prepared to go as low as China wants and so planned gas pipelines have stalled.

A 2,700-km (1,680-mile) crude pipeline to carry 600,000 barrels per day from East Siberia to the Chinese border has been slowed amid cost problems. Russia's pipeline monopoly Transneft (TRNF_p.RTS) has upped its forecast for the cost of the project, which is now due to be launched in late 2009.

China is the world's second biggest oil consumer, after the United States, and Transneft has said the pipeline will allow Russia, the world's second-largest oil exporter, to make its exports more flexible and re-route volumes to Asian markets.

The gas pipelines, which would go through northeastern and western China, have similar intentions, but as Beijing and Moscow argue about pricing, Chinese oil firms have been making gas deals with other gas producers such as Turkmenistan.

(Reporting by Chris Buckley; Editing by Alex Richardson)