OREANDA-NEWS. On April 21, 2009 An intergovernmental agreement on cooperation in the oil sector between Russia and China was signed as part of Russian delegation visit to China led by Deputy Prime Minister of Russia and Chairman of Rosneft, Igor Sechin, and joined by Rosneft President Sergey Bogdanchikov, reported the press-centre of Rosneft.

A 23-year agreement between Russia and China, signed by Igor Sechin and Deputy Head of the Chinese State Council Wang Qishan has lead off to execution of USD 25 billion loan agreements between Rosneft, Transneft and China Development Bank, as well as agreements on construction of a branch pipeline to China from Eastern Siberia – Pacific Ocean pipeline (ESPO). Construction of the branch pipeline (which will connect Russian Skovorodino and Chinese Mohe) will start at the end of April 2009 and will be completed by the end of 2010. The agreement also provides for a possible increase in the branch pipeline capacity above the originally stated 15 million tons.

The agreement on cooperation was initialed in February during the previous visit of Igor Sechin to Beijing together with signing agreements on USD 10 billion and USD 15 billion loans to Transneft and Rosneft respectively, as well as a 20-year contract on oil deliveries to China.

Commenting on the agreement, Igor Sechin noted “the unique nature” of the document, since it provided for long-term oil deliveries to China against financing. “As part of this agreement, the Chinese companies will also get access to Russian upstream assets” – he added.

President of Rosneft noted that he expected the ESPO transportation tariff to be established at a level ensuring profitable development of Eastern Siberia fields, which are the main source of ESPO capacities utilization.

“There was an instruction from the Russian Government to finalize the networking tariff for ESPO. Transneft and Federal Tariff Service are working on that. The currently discussed tariff range should bring a decision on the networking tariff that would ensure normal economics for the company” - Bogdanchikov said.

He also recalled Rosneft plans to start production at the major Vankor field in Eastern Siberia this year and at Yurubcheno-Tokhomskoye Field in 2012-2013. “We will continue negotiations with Federal Tariff Service and ministries to get profitability after transportation costs that ensures sufficient investments to reach crude oil production targets as stated in the Russian Energy Strategy through 2030” – Bogdanchikov added.

After the negotiations President of Rosneft responded to questions from Interfax Agency. He particularly spoke on the Company current plans to build a refinery in China in collaboration with the Chinese National Petroleum Corporation (CNPC). “We will focus on one real project – Tianjin Refinery” – he said. Replying to a question on possible expansion of refinery capacity from 10 million tons as originally planned to 20 million tons, he noted that the decision would depend on Feasibility Study results. “The plant capacity will be defined based on Feasibility Study. It depends on the market and logistics”.

Speaking of Rosneft activities in the Russian Far East, Sergey Bogdanchikov expressed an opinion that the pricing formula for gas to be delivered to the domestic market from Sakhalin-1 should be unified for the entire Far East (for Sakhalin, Khabarovsk and Primorsk regions).

According to Sergey Bogdanchikov, participants of Sakhalin-1 Project are now actively talking to Gasprom about agreement on the gas delivery prices. Bogdanchikov noted that there are no deadlines. “We do not have a critical date or deadline. The negotiations will be over when both parties are satisfied” – he said. “Do not forget that Gasprom is not the final instance – there are consumers whom we also need to talk to in order to resolve the issue”, - Bogdanchikov clarified, also having emphasized that “the objective is first of all to meet domestic demand”.

“As for the exports, when the Chinese party (buyer), Sakhalin-1 shareholders and Gasprom, who is the only one with the export rights under the Russian law, when they all reach mutual agreement, then gas export sales will start” – Bogdanchikov added.

In response to a question on Rosneft plans for Iraq, Sergey Bogdanchikov said that if the Company ever gets an opportunity to work in the country, it may attract some Iraqi company as a partner. “Of course we can operate on our own, but we would rather find mutual understanding with some local company. It can be very productive” – believes Bogdanchikov.