Russia, China to build $5 bln refinery in 2 yrs-UPDATE 2
Trade the News
Tuesday September 21, 2010 12:10:13 PM GMT
* Russia to supply 70 percent of oil the refinery
* Refinery to process 13 million tonnes of oil per year
(Adds details, analyst comments)
MOSCOW, Sept 21 (Reuters) - Russia and China agreed on Tuesday to forge ahead with a $5 billion refinery to boost supply to fuel hungry Beijing but the key question for Russia -- the future of gas exports to China -- went unanswered.
Russia's powerful oil boss, Deputy Prime Minister Igor Sechin, joined Chinese Vice Premier Wang Qishan in the future refinery town of Tianjin to lay the cornerstone of the 13-million-tonne per year (260,000 bpd) refinery, to be completed in two years.
The refinery is a joint venture between China National Petroleum Corp and Russia's top oil producer, state owned Rosneft.
As if to underline the urgency of the project for fuel hungry China, the second-largest oil consumer after the United States, its petrol or gasoline consumption rose 10.7 percent year on year in August, official data showed on Tuesday.
Under the agreement, Russia will supply 70 percent of the oil to the Tianjin refinery, a spokesman for Russian Deputy Prime Minister Igor Sechin, in Tianjin for talks, told Reuters by telephone.
The spokesman said Sechin put the cost at $5 billion but did not specify how the investment would be shared.
The refinery will be fed not by Russia's newly completed 15 million tonne per year pipeline branch to China, which is due to begin pumping oil from East Siberian fields to northern China early next year.
Russia wanted to fill the Tianjin refinery with pipeline barrels but China committed them to 10 refineries run by CNPC subsidiary PetroChina.
"One option is to create a joint venture which will buy oil on market terms and supply it to the refinery," the Sechin spokesman said. The rest will come from the Middle East.
GAS
Sechin travelled to China to set up a visit by President Dmitry Medvedev next week. An industry source told Reuters that Medvedev is expected to discuss gas pricing, an issue of far greater concern to Russia than the refinery.
"The refinery is more a political project," Troika Dialog energy analyst Valery Nesterov said. "Time is getting away from them on gas, the stakes are rising and tensions are rising in expectation of completion or non-completion of a gas deal."
"Every year lost reduces the likelihood of Russia exporting gas to China at all."
Russia and China would sign new "expanded" terms for Russian gas deliveries to China later this month, Interfax quoted the head of the export arm of Russian gas pipeline monopoly Gazprom as saying after the Tianjin talks.
The price, for many years the stumbling block to a final deal, would only be determined next year, Interfax quoted Gazprom export chief Alexander Medvedev as saying.
Price talks have dragged on for years, while China's options for gas imports have multiplied. The country also has potential domestic shale gas reserves which could leave Russia squeezed from east and west.
Russia's ambitions to sell liquefied natural gas (LNG) to U.S. markets have been sharply curtailed by the mass development of shale gas in North America. (Reporting by Melissa Akin, Vladimir Soldatkin and Katya Golubkova; Editing by Clarence Fernandez and James Jukwey)
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