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Energy a Key Issue During Hu's Visit to Russia

Posted on: Monday, 4 July 2005, 21:00 CDT

MOSCOW. July 4 (Interfax) - Interaction between the Russian and Chinese fuel and energy industries was a key issue during a recent visit by Chinese President Hu Jintao to Russia.

A Russian-Chinese communique released after a meeting on Saturday between Hu and Russian President Vladimir Putin said, among other things, that the two countries' governments had decided to support Russian-Chinese oil and gas projects, including a plan to lay an oil pipeline from Russia to China, and projects for the joint development of oil and gas fields in Russia and China.

Hu and Putin also instructed Chinese and Russian enterprises to hold consultations on those projects.

On Friday, Rosneft and Chinese petrochemical corporation Sinopec signed a protocol to set up a joint venture to explore the Venin area as part of the Sakhalin 3 project.

In the protocol, the two companies pledged to speed up the exploration of Venin and to give an early approval to a new program for the exploration of Venin. The program would involve boring one exploration well in the area in 2006.

Early last month, Rosneft and Sinopec signed a memorandum of cooperation that makes provision for joint projects in Russia and outside it.

Rosneft holds a 74.9% stake in the Venin block, and the State Sakhalin Petroleum Company a 25.1% stake. Rosneft in 2003 obtained a five-year license for the exploration of Venin, which is expected to contain 114 million tonnes of oil and 315 billion cubic meters of gas.

During Hu's visit, Rosneft also signed a long-term agreement with another Chinese company, CNPC, under whose terms the two companies are to consider larger oil exports to China.

For this purpose, Rosneft promised to consider using the Atasu- Alashankou and Taishet-Skovorodino pipelines.

Atasu-Alashankou will be a pipeline running from Kazakhstan to China. Taishet-Skovorodino would be part of a pipeline system that would link eastern Siberia to the Pacific. An offshoot may be laid to China from Skovorodino.

CNPC said it planned to make every effort to make the earliest possible agreements to export project gas produced under the Sakhalin 1 project to China. Rosneft holds a 20% stake in Sakhalin 1. Documents to that effect may be signed in autumn 2005.

Rosneft and CNPC are also considering joint exploration and development of oil and gas fields on the Sakhalin shelf. In particular, the companies will consider such forms of cooperation as strategic investment, setting up a joint venture, and exchange of assets.

Rosneft President Sergei Bogdanchikov said after the signature of the agreements with Sinopec and CNPC that Rosneft planned to bring its oil exports to China to 9 million tonnes in 2006 from 4 million tonnes in 2005.

"We will be exporting 10 million tonnes yearly until 2010," he said.

Bogdanchikov said the oil Rosneft is exporting to China was produced by its subsidiary Rosneft-Purneftegaz.

An earlier report said Rosneft had reached an agreement with China to sell 48.4 million tonnes of oil to China for the period until 2010 on the prepayment basis.

Shortly before Hu's visit, experts expected the two countries to discuss chances for the Chinese companies buying into Rosneft subsidiary Yuganskneftegaz. However, Bogdanchikov said the issue had not come up. Nor do any official reports on talks during the visit mention that a proposal for the priority construction of a pipeline to China as part of the eastern Siberia-Pacific oil pipeline system, a strategic issue for China, had been raised.

Hu recently also visited Kazakhstan, where oil and gas issued were also brought up. The two countries decided to create a favorable environment for further trade and deals on energy, transportation and finance.

China and Kazakhstan decided to support and provide all the necessary resources for finishing the construction of a section of the Atasu-Alashankou pipeline on time, accelerate a preliminary study of a plan to lay a gas pipeline from Kazakhstan to China, and speed up the estimation of the resource base for the project.

Source: Daily News Bulletin; Moscow - English

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