Thursday, December 30, 2010
Russian Oil Pipeline Went To China, but not Japan
For years, both Japan and Chinahave negotiated with the Russians to construct an oil pipeline in the Asian region. As Wen Jiabao made his trip to Russia in the end of October, the Russians agree to extent the oil pipeline to the Chinese border. Once again, Japan fell behind the Chinese. Japan wished to build an oil pipeline from Siberia to Japan before China, going as far as providing both capital and technological support. Yet, China won. On October 28, Russia and China came to an agreement to import Russian oil via an offshoot of the Eastern Siberia-Pacific Ocean (ESPO) pipeline to China in return for Beijingproviding about $20-$25 billion in loans to Russian state companies Rosneft and Transneft. According to the agreement based on the Chinese media, Transneft and China National Petroleum Corporation (CNPC) agreed to build an offshoot to the ESPO pipeline to China. The 4,700km ESPO pipeline is currently under construction and is being built in two stages. The first 2,757km stage will link Taishet in the Irkusk region to Skovorodino. The offshoot to Chinawould connect Skovorodino, which is situated about 70km from the Chinese border, to northern China. According to some sources, Rosneft would commit to transporting around 15mn tones per annum, or about 300,000b/d (accounting for almost 4% of China’s total oil consumption in 2007), to China over a 20 year period. During the chaotic financial crisis, China’s loan offer is a smart geo-strategic and tactical move, which may provide it with a stronger bargaining position in the ongoing negotiations concerning long-term oil export prices and volumes.