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China To Take 5% Of Rosneft’s Output In New Deal

China

CEFC China Energy is set to gain up to 260,000 barrels per day of oil supplies from Russia as part of its recent deal with Moscow to invest $9.1 billion in the Russian state oil giant Rosneft, according to a new report by Reuters.

The recurring shipments will mean China will take five percent of Rosneft’s output, which will challenge Western oil traders’ dominance in the Asian markets.

Chinese oil and gas investments have also reached Saudi Arabia, with CEFC offering to purchase a five percent stake in Saudi Aramco.

CEFC will buy a 14 percent stake of Rosneft from the Qatar Investment Authority and Glencore. The two entities acquired a 19.5 percent stake from Rosneft just nine months ago. The resale occurred so soon because Glencore, QIA’s partner in the deal, and the QIA itself looked to reduce debt repayments, according to Rosneft CEO Igor Sechin.

“This deal intensifies the energy relationship between Russia and China. A direct stake in Rosneft will make CEFC China the main driver for the relationship of Rosneft with China, ahead of CNPC, Sinopec and Beijing Gas,” Wood Mackenzie senior analyst Christian Boermel said last month, when the deal was closed. “Rosneft keeps its customers close to its heart – buy a stake, get an oil supply agreement. CEFC China could soon take stakes in Rosneft projects, either in cash-intensive upstream projects, or in the downstream.”

Related: Oil Markets Fear Iraqi Escalation

The plan is for China to integrate its supply chain in order to increase efficiency within its One Belt, One Read economic plan for its Asian allies.

“The current focus is on upstream oil and gas resources, including exploration and production. The next step will be to bring these resources to China and to develop together, with Rosneft, petrochemical production, further extending the supply chain,” a CEFC spokesman said.

By Zainab Calcuttawala for Oilprice.com

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