SAINT-PETERSBURG - Russian oil giant Rosneft and Chinese state firm CNPC on Friday signed a $270 billion deal to supply China with oil over 25 years, an agreement hailed by Russian President Vladimir Putin as "unprecedented."
The agreement was signed by Rosneft chief executive Igor Sechin and CNPC head Zhou Jiping in the presence of Putin and visiting Chinese Vice Premier Zhang Gaoli.
"An estimated value of the contract in current market parameters is absolutely unprecedented — 270 billion dollars," Putin told participants of the annual Saint Petersburg International Economic Forum.
Addressing chiefs of global energy companies like Eni, ExxonMobil (IW 500/1) and Statoil, Putin reiterated Russia's plan to diversify its energy clients away from its traditional reliance on Europe.
Putin has made a priority of stabilizing Russia's sometimes prickly relations with its giant eastern neighbor at a time when its ties with the West are becoming ever more problematic.
Russia wants to diversify its base of energy customers away from Europe and is aware it has not fully exploited the colossal potential of the Chinese market.
"Essentially, this is a new era of cooperation which means that in our cooperation with our strategic partners we shift from purely raw supplies to full-fledged cooperation in the engineering and manufacturing sphere," Putin said.
Top Putin ally Igor Sechin told reporters earlier that the deal would involve the delivery of more than 360 million tons of oil over 25 years with a total value of $270 billion (204 billion euros).
Russia is slated to receive an upfront payment of some $60 billion. Sechin said that deliveries could start as early as this year.
The Flow of Oil
The initial agreement was reached during a visit to Moscow in March by Chinese President Xi Jinping, his first foreign visit after taking over from Hu Jintao as the country's leader.
That agreement pledged to gradually triple the supply of Russian oil to China over the next 25 years from their current level of 15 million tons per year. Putin said that under the contract Russia will be sending up to 46 million tons of oil to China annually.
The oil in the $270 billion deal would be delivered to China from the existing Eastern Siberia-Pacific Ocean (ESPO) oil pipeline that would pump the oil directly to the Chinese region of Mohe.
Among a host of other energy agreements signed in Saint Petersburg, CNPC and Russian independent gas producer Novatek signed a deal to send Russian liquified natural gas (LNG) to China.
Under the deal, CNPC will purchase 20% in the Russian Arctic project known as the Yamal LNG in which France's Total has 20% and Novatek holds the rest. The project is scheduled to producing gas in 2016.
Rosneft also signed agreements with Eni, Exxon and Statoil on LNG supplies.
Putin said tapping into the potential of the Asia-Pacific markets would allow the country to liberalize LNG exports.
Moscow is also working to finalize a potentially huge gas deal with China but a commercial contract has so far proved elusive as talks have become mired in pricing disputes.
–Marina Koreneva, AFP
Copyright Agence France-Presse, 2013
