UPDATE 2-Russian oil eyes Chinese loans after pipeline deal

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By Anton Doroshev and Robin Paxton

MOSCOW, Oct 28 (Reuters) - Russia signed a pipeline deal with China on Tuesday to create a new overland supply route for Siberian oil as the two countries negotiate a package of export-backed Chinese loans expected to exceed $20 billion.

Russian pipeline monopoly Transneft (TRNF_p.MM) and China National Petroleum Corp (CNPC) agreed to build a spur to carry 15 million tonnes a year of oil (300,000 barrels per day) between the countries' trunk pipelines from 2009. Russia's top energy official, Deputy Prime Minister Igor Sechin, said Russian oil firms would receive "considerable" loans from China in return for increased oil supplies and that the exact amount would be determined by individual projects.

"Financing is required to realise major projects," Sechin told reporters after the signing ceremony, attended by Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao.

"The sum of the loans will be determined by the projects. It's considerable," Sechin said.

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 its new generation of fields in East Siberia.

Three industry sources close to talks told Reuters on Monday the countries were in talks to secure between $20 billion and $25 billion in Chinese loans in exchange for greater supplies of Russian oil. [ID:nLR563516]

The sources said such a deal would give Beijing access to 300 million tonnes of Russian oil over the next 20 years -- or 15 million tonnes a year, the capacity of the pipeline spur.

This would be enough to meet 4 percent of China's annual demand, while allowing Russian firms access to finance during a global credit squeeze and an oil price slump.

"For the Chinese, it is about securing a strategically vital land route for oil imports, while for the Russians it is about the money," Alfa Bank analysts said in a note.

Sechin declined on Tuesday to specify the amount of Chinese loans or Russian oil supplies being discussed. He said Russian and Chinese energy companies would submit a proposal for cooperation by Nov. 25.

"It's still early to speak of the credit agreement but work will be spread over production, refining, sales and transportation," the deputy prime minister said.

He said Russia planned to increase oil deliveries to China and that falling oil prices would not be critical for Russia this year. Crude CLc1 has more than halved in value to about $63 a barrel from July peaks above $147.

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