Four
industry sources familiar with the situation told Reuters that Rosneft was in
talks with Chinese state firm CNPC about the borrowing, which would echo a $25
billion deal the two companies clinched last decade.
Rosneft
said it was not currently in talks about obtaining a loan from China but
declined to comment when asked whether it may enter in negotiations at a later
date.
In
the previous deal, Rosneft and Russian pipeline monopoly Transneft borrowed
money to help Rosneft acquire the assets of nationalized oil producer YUKOS
while agreeing to build a pipeline to supply China with 300,000 barrels per day
for 15 years.
This
time, Rosneft wants to borrow money as it is close to completing a $55 billion
acquisition of rival TNK-BP to become the world's largest listed oil producer.
Russia's
leading oil company, controlled by the Kremlin, is considering ultimately
doubling supplies to China, sources said.
"It
can be a combination of delivery options. The strategic line is to increase
supplies to China," one source familiar with the situation said.
"The
reason why China is willing to lend is simple. They sit on over 3 trillion of
dollars in reserves and are looking to diversify their investments," he
added, referring to China's foreign exchange reserves of $3.3 trillion.
Rosneft
and CNPC declined comment.
The
first loan-for-supply deal between the two companies connected directly for the
first time the world's largest energy producer and consumer.
It
came after a number of energy disputes between Russia and its neighbors which
cut gas and oil supplies to Europe several times, drawing criticism and calls
from the European Union for diversification away from Russian energy resources.
Russian
President Vladimir Putin retaliated by saying Moscow would divert more energy
to Asia.
Since
then Russia has been steadily increasing crude exports to Asia at the expense
of deliveries to Europe with flows due to amount to around 15 percent of
Russian oil exports this year via pipelines to China and to the Pacific coast.
Should
deliveries to China double, the share of Russian exports to Asia will amount to
over a fifth of overall exports by the world's largest oil producer and the
second largest exporter after Saudi Arabia.
Energy
relations between Moscow and Beijing have been, however, complicated in the
past by disputes over oil shipping tariffs along the existing pipeline.
They
were ultimately resolved after Russia agreed to apply a discount on supplies.
The head of Transneft, Nikolai Tokarev, said this week that deliveries to China
would rise over time.
"We
are neighbors and we need to develop ties, especially given that China has a
crazy oil deficit," he told business daily Kommersant.
Sources
said it would take time before a final deal was reached and differences over
various delivery options were resolved.
Finding
the needed oil resources will also be challenging as Russia is several years
away from a fresh increase in output in East Siberia, the region closest to China.
"They
don't know where they can source the oil and the route issue is a significant
one," one of the sources said.
The
first source said discussions centered around doubling capacity of the existing
pipeline to China by building a parallel link. Volumes could be also topped up
with deliveries from the Pacific port of Kozmino.
"Building
a parallel link is certainly not nearly as expensive as building the first one
from scratch," he said.
A
second source said a second link might be an overly expensive option and Russia
could opt to increase the throughput capacity of the existing pipeline by
adding pumping stations.
A
third industry source said China was ready to lend as long as Rosneft agreed to
ship more oil via Kazakhstan's existing pipeline to China, which would soon be
short of volumes due to depletion of some Kazakh fields.
"These
discussions are under way on a working level," Russian Deputy Prime
Minister Arkady Dvorkovich said on Wednesday when asked about possible
deliveries though Kazakhstan.
However,
Transneft fiercely opposes the plan as it would cut its transport earnings.
Whatever
the approach, funding is a pressing issue for Rosneft.
It
needs to borrow up to $40 billion to complete the TNK-BP acquisition. It has
managed to cover its most immediate needs by lining up a syndicated loan as
well as a $10 billion financing from traders Vitol and Glencore.
But
it also needs dozens of billions of dollars to launch new huge fields in
Russia's Arctic and funds to finance a $25 billion refinery modernization
program.
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