Putin Suggests Beijing May Share In Rich Oil And Gas Field

Russian President Vladimir Putin said his government may offer China an opportunity to hold a share in one of the biggest energy projects in Siberia, the Vankor oil and gas field.

Putin made the tentative offer on Sept. 1 as he and China’s vice premier, Zhang Gaoli, presided over the launch of construction of the oil pipeline that will carry nearly 40 trillion cubic meters of gas to China over 30 years, earning Russia $400 billion during the period.

“The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and, above all, our key partner China,” Putin said at the ceremony outside Yakutsk, the capital of Russia’s Republic of Yakutia.

In fact, China is so important a partner that Putin said it was likely that the Kremlin would permit Beijing to become a shareholder in the Vankor field in the eastern Siberian region of Krasnoyarsk. Vankor, owned by Rosneft, the state-run Russian oil giant that owns the field, has oil reserves estimated at 520 million metric tons and gas reserves of 95 billion cubic meters.

“Vankor is one of the biggest production operations today and very promising,” Putin told Zhang, according to a transcript of the event published on the Kremlin website. “Overall, we take a cautious approach to letting in our foreign partners, but we of course set no restrictions for our Chinese friends.”

Putin added, “The state authorities support this idea and we would welcome your participation.”

Since Putin first became Russia’s president in 1999, the Russian government has increased its hold on the country’s enormous energy resources. In the process, it has kept Western oil and gas companies and even private Russian firms from developing them.

Still, Russia needs the money and expertise available only from the West, especially at a time when the country’s oil companies are impeded by sanctions imposed by the European Union and the United States because of Moscow’s suspected support of pro-Russian separatists in eastern Ukraine.

As a result, Rosneft is seen as being eager to offer partnerships in Vankor to foreign companies, including Britain’s BP, the state-run Oil and Natural Gas Corp. of India and ExxonMobil of the United States. The offer of a share to China indicates that Moscow is eager to show that it can get what it wants from partners in the East as well.

Meanwhile, at the ceremony outside Yakutsk, both Putin and Zhang autographed the newly welded pipeline, a tradition in Russia on such occasions. The structure has been dubbed the “Power of Siberia.” Also present was Alexei Miller, the CEO of Gazprom, which will provide the gas to China.

“Gazprom is always a reliable supplier of gas to its customers,” Miller said, “which also applies to the “Power of Siberia.”

By Andy Tully of Oilprice.com