OREANDA-NEWS. January 10, 2014. Russia, the world's largest crude oil producer, will export less oil than previously expected to China in 2014, pipeline monopoly Transneft said, as the Kremlin plays a balancing act between Asia and Europe.

Transneft said on its web site that Rosneft would export an additional 600,000 tonnes (12,000 barrels per day) to China via the East Siberia-Pacific Ocean (ESPO) pipeline spur from Skovorodino near the border to Mohe in northern China.

The link, the main route for oil from Russia to China, had previously been expected to pump 2 million additional tonnes next year.

"We received a letter from Rosneft. An additional 600,000 tonnes will (shipped) via Skovorodino-Mohe spur," Transneft's vice president Mikhail Barkov is quoted as saying.

He said that the volumes would total 15.6 million tonnes next year, which could mean a decline from the 15.8 million tonnes expected this year according to Reuters calculations.

This is less than the more than 17 million tonnes previously expected by Transneft and traders, and would play at the hands of Europe, which has been anticipating dwindling supplies from Russia at the expense of increasing flows to China.

"Rosneft is fulfilling its contractual obligations to its Chinese partners in accordance with the conditions of the agreement," a Rosneft spokeswoman said in emailed comments.

State-run Rosneft, Russia's largest oil company, has struck agreements to almost triple oil supplies to China in coming years from the around 300,000 barrels per day (15 million tonnes a year) it ships there currently.

President Vladimir Putin has urged Russian oil and gas companies to forge close ties with energy-hungry Asian economies. Europe, traditionally the biggest market for Russia's oil and gas, is trying to diversify its supplies.

EUROPE-ASIA BALANCE

It was not immediately clear why exports to China would be lower than expected next year. Some analysts say that it is the echo of a spat between Rosneft chief Igor Sechin and the head of Transneft, Nikolai Tokarev, who were forced by Putin to sign an agreement in October on funding to expand ESPO.

Former oil tycoon Mikhail Khodorkovsky, who was freed from prison on Friday and flown to Germany following a pardon from Putin, said in a Russian media interview that Putin may believe "too big a bet has been made on Asia" and be eager to mend fences with Europe.

Khodorkovsky, whose now defunct oil company Yukos brokered the first supply deal with China in the late 1990s, had been in jail since 2003 after he fell out with the Kremlin. Yukos was sold off at auction and its main production asset was snapped up by Rosneft.

Russian Energy Minister Alexander Novak has said that Russia will not cut oil supplies to Europe despite its plans to treble flows to China, with output from new fields to cover rising export commitments.

Traders have expected Rosneft's export volumes to China to rise to as much as 20 million tonnes a year by 2015, on a par with Germany, the biggest consumer of Russian oil to date.

Exports from the Pacific port of Kozmino are estimated to total about 23 million tonnes, while an Energy Ministry official has said these could rise to as much as 30 million tonnes next year from 21 million tonnes in 2013.

Volumes shipped to China from Kozmino are not defined, but expected to outstrip those to Japan in near future.

Rosneft has also agreed to ship 7 million tonnes of oil a year to China via Kazakhstan, a profitable duty-free route within a Moscow-led customs union. On Tuesday, Russia and Kazakhstan formally signed the deal on oil exports to China.

Barkov also said that the Caspian pipeline consortium (CPC), in which Transneft is a shareholder, would increase oil supplies from a terminal near the port of Novorossiisk by 6 million tonnes next year from expected 32.4 million tonnes in 2013 thanks to works to expand the pipeline.

One of the key sources for new oil was the Kashagan field in Kazakhstan, the world's biggest oil find in decades, initially launched in September.

It was mothballed due to leaks of gas from the pipelines. Barkov said that CPC is not expecting oil from Kashagan until summer, or "maybe even later", confirming source-based reports.