Sanctions on Russia open door for Chinese oil and gas companies
Mainland suppliers of equipment and services for oil and gas sector are seeing orders rising
Economic sanctions from the United States and the European Union against Russian officials and energy companies, and China's signing of a major long-term natural gas deal with Russia, have opened more doors for Chinese suppliers of equipment and services to Russia's oil and gas sector.
A spokesman for Sichuan-based and Hong Kong-listed Honghua Group, one of the world's largest land-based oil and gas drilling rig makers, said close to 30 per cent of its orders on hand in the first 10 months of the year were from Russia. In the past few years, about 25 per cent of its sales had been derived from Russia.
Laurence Shu, the chief financial officer of Shenzhen-based and Hong Kong-listed Petro-King Oilfield Services, said it had "a lot more interaction" with Russian oil and gas firms and services providers in the past few months.
"We have set up an office in Moscow and assigned a team of marketing and technical engineers to follow up with the business opportunities with Russian clients," Shu told the . "We are progressing well in technical discussions and commercial terms negotiations towards a few potential service contracts."
New opportunities from Russia come at a time when Honghua and Petro-King are witnessing revenue declines from the mainland market, where corruption probes against top officials of PetroChina and budget cuts by the firm have resulted in delayed and reduced orders.
Since March, the West has unleashed three rounds of sanctions against Russian officials over Russia's annexation of Crimea from Ukraine.
The sanctions are aimed at putting pressure on President Vladimir Putin and businesses and political leaders loyal to him.
Liu Qian, a researcher at the China Energy Strategic Research Institute of China University of Petroleum, said it would take time for mainland suppliers to boost their business in Russia, which has relied heavily on Western firms, and they might find it easier to set up assembling facilities there to avoid import duties.
With the rouble having depreciated against the US dollar by about 40 per cent over the past few months, Honghua's spokesman said most of its Russian contracts were priced in US dollars and it would seek more ways to lower foreign exchange risk.
