DURBAN. March 27 (Interfax) - Russian state oil major Rosneft (RTS: ROSN) will ship an additional 2 million tonnes of oil to China along a branch of the Eastern Siberia - Pacific Ocean oil pipeline (ESPO) in 2014 and will gradually increase such shipments to 15 million tonnes by 2018, Energy Minister Alexander Novak told reporters.
"There will be a cumulative schedule for the Skovorodino-Mohe [pipeline branch]. There will be 800,000 tonnes this year, next year an additional 2 million tonnes, and cumulatively to reach up to 15 million tonnes by 2018," Novak said.
A source at a relevant government agency told Interfax that 800,000 tonnes will be shipped from July 1 to December 31, 2013. He said that if additional oil shipments to China total 2 million tonnes in 2014, in the subsequent three years they will amount to 5 million tonnes annually. From January 1, 2018 to December 31, 2037 additional shipments will reach 15 million tonnes per year, and 7.5 million tonnes will be shipped in the first half of 2038.
However, in order to expand oil shipments via the Skovorodino-Mohe pipeline Russia will have to create the conditions for the timely overhaul and expansion of the branch, while China will have to implement similar measures for the Mohe-Daqing pipeline by January 1, 2018. The countries would have to overhaul the Skovorodino-Mohe pipeline by January 1, 2015 to accommodate the increase in oil shipments to 5 million tonnes.
The source said agreements do not specify the source of additional crude supplies.
Novak also said that, with shipments of low-sulphur oil to the east increasing, the Energy Ministry is working on maintaining the quality of Urals crude shipped west.
"We intended to pursue such a policy so that the quality of oil on western and eastern routes meets contractual obligations," the minister said.
He said the plans to ramp up pipeline shipments of oil to China do not eliminate the goal of creating a benchmark ESPO oil grade. "We are also setting such a goal for ourselves - to make it an exchange benchmark, but this is not a simple matter, an appropriate amount of oil must be sold for this. Exchange trading of oil must be organized for this. We are now in the process, we've created a working group and it is already working according to a certain schedule," Novak said.
Russia is supplying China with 15 million tonnes of oil annually via a spur of the Eastern Siberia - Pacific Ocean pipeline (ESPO). Rosneft and Russian oil pipeline company OJSC Transneft (RTS: TRNF) concluded 20-year agreements in 2009, under which deliveries began on January 1, 2011. In return for the long-term deliveries, Rosneft received from Chinese banks a credit of $15 billion and Transneft obtained one of $10 billion.
China has several times raised the question of ramping up oil supplies from Russia, particularly in order to facilitate the implementation of the Tianjin oil refinery project, which Rosneft and its Chinese colleagues are planning to build with a 10-million-tonne capacity.
Rosneft president Igor Sechin said last week that his company had reached an agreement with China to gradually increase oil shipments. He said the new agreement calls for increasing shipments in line with infrastructure capabilities to a peak of up to 31 million tonnes along three routes. The company is also raising $2 billion from China Development Bank secured by oil supplies for a period of 25 years.
Sechin said shipments would increase from Rosneft's existing resource base. In future, Rosneft will launch new fields in Eastern Siberia and thereby also increase oil shipments to China.
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