Sinopec parent seals deal to buy Russian oil, opts for rail transport

PUBLISHED : Friday, 06 July, 2007, 12:00am
UPDATED : Friday, 06 July, 2007, 12:00am

China Petrochemical Corp, Asia's largest oil refiner and parent of Sinopec, has sealed a long-awaited deal to buy crude oil from Russia and transport it by rail through Mongolia.

The company struck an agreement a month ago with the world's second-largest oil producer, a spokesman said, without giving further details. The deal had suffered lengthy delays due to prolonged negotiations on railway freight costs.

China Petrochemical would buy 2.5 million tonnes of oil annually from Russian oil giant Rosneft under the contract, Moscow daily Kommersant reported. Added to the 8.9 million tonnes contracted with China National Petroleum Corp (CNPC), Rosneft's exports to the mainland could total 11.4 million tonnes a year.

The deal was signed after almost a year of talks between China Petrochemical and railway companies in Russia, Mongolia and the mainland, the paper said.

The mainland imported 15.96 million tonnes of crude oil from Russia last year, up 24.9 per cent from 2005. Russia was China's fourth-largest crude supplier, accounting for 11 per cent of imports last year.

CNPC has been in talks with Russia on building an oil pipeline between eastern Siberia's oil fields and northeast China for 14 years as the mainland seeks more energy for is fast-growing economy.

Construction of a 2,400km pipeline costing US$1.7 billion was proposed to start in 2003, but intense lobbying from Japan to build an alternative route to Russia's eastern seaboard delayed the plan indefinitely.

A pipeline will cut oil transport costs in the long run.

CNPC has also been in talks with the world's largest natural gas producer to build two gas pipelines, one to link the mainland's northwest region to western Siberia and the other from the northeast to eastern Siberia.

The country is the world's second-largest oil consumer after the United States, burning 7.44 million barrels a day last year, according to the BP Statistical Review of World Energy. Russia was the world's second-largest oil producer after Saudi Arabia with an output of 480.5 million tonnes last year.

Back on track

Rate talks with Russian, Mongolian and mainland rail firms delayed deal

Oil that China Petrochemical will buy from Rosneft, in tonnes per year 2.5m