• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 25 mins Emissions Need To Be Halved To Avoid 3C Warming
  • 6 hours The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 15 hours Hormuz and surrounding waters: Energy Threats to the World: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack
  • 6 hours Coal Boom in Asia is Real and a Long Trend
  • 1 hour Pioneer CEO Said U.S. Oil Production would be up to 15 mm bbls/day NOW if we had the pipelines. Permian pipelines STARTING Q3
  • 9 hours The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 4 hours Solar Panels at 26 cents per watt
  • 9 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 9 hours US to become net oil exporter in November: EIA
  • 6 hours US Shale Drilling lacks regulatory body.
  • 14 hours Trudeau approves Trans Mountain Pipeline
  • 17 hours The Latest: Iranian FM Says US Cannot Expect To ‘Stay Safe’
  • 16 hours The Plastics Problem
Alt Text

How To Buy Gold For $3 An Ounce

Gold is once again gaining…

Alt Text

Tanker Attacks Could Have A Lasting Effect On Oil Prices

After the tanker sabotage attempts…

Alt Text

Is This The Best Dividend Stock In Oil & Gas?

Supermajors have had a tough…

John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

More Info

Trending Discussions

China Gets Access to Siberian Oilfields

On 18 October state-owned Russian oil firm Rosneft signed a memorandum of understanding with state-owned China National Petroleum Corp., a significant arrangement that gives China its first direct access to East Siberia’s rich hydrocarbon fields for joint development.

The MOU builds upon a deal signed in June in the presence of Russian President Vladimir Putin and Chinese Vice Premier Zhang Gaoli, which saw Rosneft receive a $70 billion upfront payment from CNPC for its promise to raise exports by 300,000 barrels per day.

Among the oilfields to be shared with CNPC is eastern Siberia’s Srednebotuobinsk field, which only began producing oil earlier this month. Srednebotuobinsk field was previously owned by Taas-Yuryakh Neftegazodobycha, whose license to develop the field Rosneft only fully acquired four days before the MOU was signed.

Related article: Is Canadian Shale Gas Worth $35 Billion?

Under terms of the MOU Rosneft will have a controlling stake of 51 percent in the future joint venture, while CNPC will own 49 percent. Rosneft President and Chairman of the Management Board Igor Sechin said, “The memorandum is another step in developing the strategic partnership between Rosneft and CNPC in various areas of cooperation. Our balanced strategic position will enable us to jointly develop and produce hydrocarbons, procure execute long-term supplies, jointly construct refining capacity and manage various assets. The development of East Siberia resource base will create additional opportunities for supplying Rosneft’s current and future refineries, including Komsomolsk refinery, Far East Petrochemical Company and Tianjin refinery, which will help meet growing demand for petroleum products in East Siberia and the Far East, as well as increase exports to China and Asia-Pacific region. The agreements reached prove once again that Rosneft has a sufficient resource base to meet its strategic goals. The participation of our long-term partner in exploration and production activities will help speed up the launch of production at Taas and will facilitate the expansion of cooperation with CNPC in other areas.”

An added bonus for CNPC is that the Srednebotuobinsk deposit is close to the Eastern Siberia-Pacific Ocean pipeline, which became operational in 2011. Rosneft currently delivers 300,000 barrels per day of oil to China via an ESPO pipeline spur, the Skovorodino-Mohe pipeline. Seven months ago Rosneft signed a new contract with CNPC to supply an additional 360 million tons of oil over the next 25 years, which stipulated that the flow capacity of the Skovorodino-Mohe pipeline should be doubled to 30 million tons per year by 2018  and earlier this year agreed to double supply volumes provided via ESPO. Rosneft said the Srednebotuobinsk field has oil and gas condensate reserves of more than 134 million tons and over 155 billion cubic meters of natural gas. According to the MOU, the Srednebotuobinsk oil will first meet energy demands in eastern Russia and then be exported to China and other Asia-Pacific countries.

Which brings up the question – why is Rosneft willing to share such a potentially lucrative field like Srednebotuobinsk?

Simple – debt.

The Russian government owns a 69.50 percent share in Rosneft, which has total proved hydrocarbon reserves of 22.8 bln barrels of oil equivalent. Interestingly, BP owns a fifth of Rosneft, which became the world's largest listed oil firm by output after acquiring BP's venture in Russia, TNK-BP, in a deal valued at more than $50 billion. The downside of the buyout was that it left Rosneft heavily indebted, searching for deals to lighten the red ink on its balance sheet by reducing its debts to banks.

Related article: Oil Traders Butt Heads over Kashagan

The news of the MOU produced a bounce on Russia’s stock market, but nationally recognized statistical rating organization Fitch Ratings Ltd. was less impressed, saying in a statement, “Fitch Ratings has downgraded Russia-based OJSC OC Rosneft's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'BBB-' from 'BBB' and removed them from Rating Watch Negative (RWN).”

What remains beyond dispute is, now that China, flush with cash, has acquired a share in Russia’s upstream activities, it is not likely to be Beijing’s last such deal with Moscow.

By. John C.K. Daly of Oilprice.com

Download The Free Oilprice App Today

Back to homepage

Trending Discussions

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News