Chinese pipeline loan deal with Russia for Siberian oil

Fri, 6 February 2009

IT IS UNDERSTOOD that China has signed a new deal with Russia for accessing Siberian oil through the East Siberia-Pacific Ocean (ESPO) oil pipeline. The agreement to set up the pipeline, estimated to cost around $800 million, was signed in Moscow in the presence of Russian Prime Minister Vladimir Putin and Chinese premier Wen Jiabao. Under the agreement, Russian pipeline monopoly Transneft and China National Petroleum Co will construct the pipeline with export-backed loans from Chinese banks, Russian deputy prime minister Igor Sechin, said. Russian companies would execute the project.

Chinese banks are expected to lend Rosneft and Transneft $20- $ 25 billion, at a time when the liquidity crunch has made borrowing difficult. Rosneft and Transneft are still in talks with China's state-owned CNPC and Chinese banks, Mr Sechin said. Rosneft and CNPC have also to settle the supply price of oil. The ESPO pipeline, with an installed capacity of 1.6m brl/d of crude, is estimated to cost more than $14 bn and is scheduled to be completed by the end of next year. The ESPO pipeline, which began operation last October with a 1,100-km section in Russia's Far Eastern republic of Yakutia, is expected initially to carry 600,000 brl/d. ESPO's first stage involves construction of the 2,757-km section linking Taishet, in East Siberia's Irkutsk region, to Skovorodino in the Amur Region, in Russia's Far East. The pipeline will have a capacity of 30m tons/yr (220m brl/yr) of oil, which will later be increased. The second section will run 2,100km from Skovorodino to the Pacific and will transport 50m tons/yr (367.5m brl/yr). It is planned that the Taishet-Skovorodino capacity will later be raised to 80m tons/yr (588m brl/yr).