* Rosneft to supply 200,000 bpd to Sinopec
* Inks refinery supply deal with CNPC
* Novatek sells LNG to partner CNPC
* Russia makes energy pivot to Asia
By Denis Dyomkin
BEIJING, Oct 22 Russian energy companies signed
a slew of deals with China on Tuesday, seeking to lock in sales
to fund costly production and pipeline projects that will direct
exports away from Europe to Asia.
The agreements, announced during a visit by Prime Minister
Dmitry Medvedev to Beijing, brought Igor Sechin, CEO of state
oil major Rosneft, closer to his goal of exporting
more than 1 million barrels per day of oil to China.
Gas independent Novatek secured a long-term
contract to supply liquefied natural gas, ahead of the lifting
of state-controlled Gazprom's export monopoly on LNG
exports expected next year.
Gazprom, the world's largest gas company, made modest
progress towards supplying pipeline gas to China but - after
years of talks - will fail to seal a deal before its Russian
rivals can compete for exports.
Medvedev hailed Rosneft's outline agreement to pump 200,000
barrels per day of crude oil over 10 years to China's Sinopec
Group, in a pre-paid deal valued at $85 billion.
"That is a large sum of money for any country - even China,"
the prime minister said. "It testifies to the fact that we have
reached a higher and completely new level of cooperation."
Speaking after the deals were signed, Chinese Premier Li
Keqiang said: "Commercial cooperation is ... extremely important
and must not be put off."
The pivot to Asia by the world's largest energy-producing
nation has been hastened by Europe's economic slump, while the
shale energy revolution threatens to close off the export route
to North America.
"It has become very important for Russia to expedite
entering the Asia-Pacific, especially the Chinese market," said
Feng Yujun, head of Russian studies at the China Institute of
Contemporary International Relations.
"It risks losing more opportunities if it keeps dragging its
FIRST SELL, THEN PRODUCE
Analysts said the Rosneft-Sinopec deal, under which supplies
are expected to flow from 2014, will increase the pressure on
Sechin to develop new fields in Eastern Siberia to increase
pipeline exports to China from the current 300,000 bpd.
Already in June, Rosneft struck deals to treble long-term
supplies to China to 922,000 bpd, raising questions over whether
it has the reserves and capital on hand to deliver.
A separate deal announced in Beijing said that Rosneft and
China National Petroleum Corp - the main importer of its oil -
had agreed on supplies to a planned oil refining joint venture
"Sechin's logic is very simple - he wants first of all to
capture the consumer for the long term," said Vitaly Kryukov, an
energy analyst at IFD Kapital in Moscow. "Then he has to figure
out how much oil he needs and where to find it."
Since taking on heavy debts to buy Anglo-Russian oil venture
TNK-BP in March for $55 billion, Rosneft has shown
greater willingness to allow China to own barrels in the ground
instead of securing future supplies against loans.
Rosneft last week signed a deal with CNPC to create an
exploration and production venture handily sited to feed in to
Russia's main eastern export artery, the Eastern Siberia-Pacific
Ocean (ESPO) pipeline.
Sechin has also buried the hatchet with Nikolai Tokarev,
head of oil pipeline monopoly Transneft, with the
two agreeing to expand the capacity of a pipeline spur from the
ESPO line that runs to China.
The ESPO trunk line runs to the Pacific port of Kozmino and
is expected to handle around 400,000 bpd of oil this year,
rising to 600,000 bpd next year. Some of that oil goes to China.
"China is likely to overtake the United States (as an oil
importer), and Russia has to stake its claim in China," said
Andrey Polishchuk, analyst at Raiffeisenbank in Moscow, saying
some oil flows to Europe would be redirected eastward.
Energy analysts Woodmac expect Chinese oil imports to
overtake those of the United States in 2017, rising to 9.2
million bpd by 2020 from 2.5 million bpd as recently as 2005.
Novatek, Russia's largest gas independent, agreed to supply
3 million tonnes per year of LNG to CNPC, one of the partners in
its $20 billion project on the Arctic Yamal peninsula.
The deal covers a period of 15 years, with pricing linked to
the so-called Japanese crude cocktail - a benchmark based on oil
Yamal LNG, being developed by Novatek, Total and
CNPC, is scheduled to start producing LNG in 2016 and supply
16.5 million tonnes per year of the tanker-shipped fuel by 2018.
Gazprom said, meanwhile, that it had reached an agreement on
a price formula to supply 38 billion cubic metres per year of
gas by pipeline to China. Yet final price terms were not agreed,
meaning talks are likely to run into 2014.
Gazprom already supplies LNG to Asia from its Sakhalin-2
terminal on the Russian Pacific island of Sakhalin. Yet its
proposed Vladivostok LNG export facility lags Novatek's Yamal
LNG project and a $15 billion Rosneft-Exxon venture to
export LNG from the Sakhalin-1 project.