China looks to boost oil imports from Russia

PanARMENIAN.Net - Beijing is in talks with Moscow to increase oil imports from Russia by purchasing all 30 million tons shipped on the Eastern Siberia Pacific Ocean (ESPO) pipeline operated by oil pipeline monopoly Transneft, Moscow News daily reported on Wednesday, February 15, citing Transneft Vice President Mikhail Barkov.

China, which needs to import an estimated 380 million tons of crude oil a year, is eager to lock in long-term contracts on the greatest possible volume, particularly given the political risks facing imports from Iran.

China will have to compete with other consumers of East Siberian oil, such as the U.S., Japan and South Korea, which buy about 60 percent of ESPO's supplies, in order to double its oil purchases from 15 million tons last year.

In addition, Russia has higher earnings on East Siberian oil sold to the U.S., earnings it would lose if all ESPO oil goes to China, Barkov said, adding that China wants to buy the additional volumes at a "competitive" price.

In early 2011, Transneft and Russian oil giant Rosneft started supplying crude oil to China on ESPO under a $22-billion deal for 20 years, but later said that China National Petroleum Corporation had underpaid for the crude supplies and unilaterally reduced payments by seven percent.

China repaid some of the debt last June, but later cut payments again. Russia has threatened to take the matter to court. Transneft head Nikolai Tokarev said in October 2011 China was likely to redeem its $40.5 million debt for delivered oil within a month.

According to Rosneft data, the company sold over 12 million tons of oil on Asian markets in 2011 at an average price of $111.4 per barrel, which is $5 per barrel higher than the price China pays under its contract, RIA Novosti reported.