Russia reassures China oil supply will be stable
By Mure Dickie in Beijing
Published: November 26 2004 13:31 | Last updated: November 26 2004 13:31
Russia has moved to reassure energy-hungry China that it can expand rail shipments of oil disrupted in recent months by the crisis at Yukos.
Chinese state media said on Friday that railway authorities of the two sides had agreed to work together to “guarantee” Russia would be able to ship at least 10m tonnes of oil in 2005 and at least 15m tonnes in 2006.
If essential infrastructure was repaired, shipments could increase to 30m tonnes a year, the official Xinhua news agency quoted Russian railway chief Gennady Fadeyev as saying in an interview.
Russia’s railway monopoly would consider cutting shipping costs if volumes reached such a level, Mr Fadeyev said.
The Russian reassurance over its ability to transport oil to China comes as Lukoil, Russia’s second-largest oil group, steps in to replace embattled rival Yukos as supplier. Yukos, which is locked in conflict with the Kremlin and faces huge tax bills, suspended some exports of oil to China in September.
Although Yukos’ shipments of oil by rail account for only a small proportion of China’s total imports, the disruption heightened Chinese concerns about the reliability of Russian supplies.
However, Russian officials say Lukoil has already begun transporting oil to northeastern China, with Mr Fadeyev saying the company planned to ship 160,000 tonnes before the end of the year. Russian media have said Lukoil plans to sell 400,000 tonnes of oil to China in the first quarter of year.
Such plans will come as some comfort to China, which was self-sufficient in oil until 1980 but which is expected to rely on imports for more than half of its demand by the end of the decade.
But even expanded rail shipments will not remove deep resentment in Beijing at what it sees as Moscow’s failure to follow through on an apparent agreement to build a major pipeline from Siberian oil fields to Daqing in northeastern China.
In May last year, Yukos agreed to sell China National Petroleum Corp, the country’s biggest oil group, a total of 700m tonnes of oil between 2005 and 2030 in a deal valued at US$150bn.
However, the pipeline which Yukos planned to use to transport the oil appears unlikely to be built as Moscow now favours a Japanese-backed alternative route that would end at Russia’s eastern coast.
China has in recent years made increasing efforts to ensure future access to energy supplies amid growth in demand fuelled by rapid industrialisation and a booming economy.
The country has accounted for around half of recent oil demand growth, overtaking Japan as the second largest market after the US.
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