Russia to Supply Energy Resources to Largest Energy Consumer China

Russia is a resource rich nation with researchers believing that the Russian Arctic territories hold 100 billion tons of oil and gas. One of the biggest consumers of energy, China, has decided expand business with the big supplier. Both have come to an agreement to build a $5 billion refinery in China.
 

Russia’s largest oil producer, OAO Rosneft and China National Petroleum Corporation will complete preliminary talks concerning the refinery next year. Once started it is expected that the refinery construction will take two years. It is expected that by the start of operations in 2015 capacity will be 13 million metric tons of crude a year or 260,000 barrels a day. The refinery will be named the China-Russia Eastern Petrochemical Oil Refinery and will be located in the Chinese town of Tientsin.

Lahan Yu, an energy analyst at Macquarie Hong Kong, Ltd. said: “China’s oil production is pretty much maxed out and it needs Russian oil. In fact, it needs oil full stop and Russia is close and convenient. As part of agreements to supply oil, Russia wants to have stakes inside China in ventures like this CNPC-Rosneft venture.”

It is expected that Russian companies will supply China with 70 percent of their crude needs and the remaining 30 percent will come from Arab countries. The two countries have signed documents to supply and buy more than crude oil. Russia will expand energy cooperation in oil, natural gas, nuclear power, electric power and coal. They supplied 9 million tons of coal to China in 2009 and have already supplied 6 million tons in the first half of 2010.

The pipeline between the two countries will actually begin operation in the end of this year when Siberian oil begins flowing into China. The pipeline program is part of a loan-for-oil deal between the 2 countries. China agreed to offer Russia a 25 billion US dollar long term loan while Russia supplies 300 million tonnes of oil through pipelines into China between 2011 and 2030.

Meanwhile, as Russia and China continue talks, Russia is attempting to defend its claims to parts of the Arctic. This is important since the area is believed to contain a major portion of the Earth’s undiscovered oil and gas. Countries trying to assert jurisdiction in Arctic areas are Russia, Canada, Denmark, Norway and the US.

In 2001 Russia submitted its claim to the United Nations claiming rights to the Lomonosov Ridge, an underwater mountain range. It was returned due to lack of evidence. It is expected that Russia, Canada, and Denmark are planning to file new claims to the UN. Russia plans to spend $63 million on research through 2013 to prove its claim.

Russia and Norway signed a maritime border treaty for the Barents Sea last week. Russia’s section of the Barents Sea is estimated to hold billions of tons of oil and gas.

In 2011, Russia will also be supplying natural gas to Germany, France, Holland and the United Kingdom. Russia will be supplying one half of European gas consumption.