Work starts on pipe to Russian oil

By Chen Jialu in Moheand Si Tingting in Beijing (皇冠体育app Daily)
Updated: 2009-05-19 09:52

皇冠体育app started construction of a crude oil pipeline to import oil from Russia Monday in Mohe in Northeast 皇冠体育app's Heilongjiang province, following a loan-for-oil accord signed with Russia in April.

Vice-premier Wang Qishan, who was present at the launching ceremony, hailed the project as "an important step" towards a long-term, full-scale energy partnership between the two countries.

"Energy cooperation plays a vital role in Sino-Russian strategic cooperative partnership," Wang said.

Chinese Vice-Premier Wang Qishan, right, at a ceremony marking the start of construction of the 皇冠体育app section of a Sino-Russian oil pipeline, in Mohe, Heilongjiang province. [皇冠体育app Daily]

"Construction teams from 皇冠体育app and Russia should coordinate with each other to ensure the pipeline goes into full operation by the end of 2010."

The construction of the Russian section of the pipeline, with a total length of 64 km, started on April 27, while the Chinese section will run for about 965 km.

皇冠体育app agreed last month to lend $10 billion to Russia oil pipeline monopoly Transneft and another $15 billion to the state-run oil major Rosneft at a discounted interest rate of 6 percent in exchange for reliable fuel supply for the next two decades.

According to the agreement, 15 million tons of Russian oil every year, or about 300,000 barrels a day, will be transported from Russia's Siberian fields over the pipeline to 皇冠体育app for the next 20 years, likely also at a discounted price. The crude oil supply is equivalent to about 4 percent of 皇冠体育app's daily fuel consumption.

Zhang Guobao, Director of 皇冠体育app's National Energy Administration (NEA), told 皇冠体育app Daily on the sidelines of the launching ceremony that the pipeline's delivery capacity is very likely to be boosted to 20 million tons a year upon its completion.

皇冠体育app and Russia will study the feasibility of increasing its delivery capacity after the pipeline is put into production, Chinese Ambassador to Russia Liu Guchang told the official Xinhua News Agency last week.

Under the agreement, 皇冠体育app and Russia will jointly build and operate the pipeline from Russia's Siberian city of Skovorodino to 皇冠体育app's northeastern city of Daqing as its terminal via 皇冠体育app's border city of Mohe.

The project was a win-win deal for both 皇冠体育app and Russia "as it helped diversify 皇冠体育app's oil import as well as Russia's oil sales", said Liao Yongyuan, vice-president of the country's largest oil and gas producer Petro皇冠体育app Co which is responsible for the construction of the Chinese section of the pipeline.

Zhang of NEA Monday told 皇冠体育app Daily that the two nations will also consider cooperating for natural gas supply.

皇冠体育app's push to gain resources as the credit freeze, the collapse of the ruble and the depressed global commodity prices prompts countries such as Russia to sell energy assets, analysts said. Meanwhile, cash-rich Chinese oil firms are eager to secure a steady supply of oil to power the country's growth, in anticipation of an economic recovery.

Petro皇冠体育app gained approval at its annual shareholders' meeting to raise as much as 100 billion yuan via debt this year to finance key projects including exploration, refining, oil and gas pipeline networks and overseas operations.

Petro皇冠体育app is also building a pipeline that transports 20 million tons of Kazakhstan oil to 皇冠体育app annually. The project will be fully operational by the end of the third quarter.