Russia’s biggest oil producer, state-controlled Rosneft, is aiming to almost double its crude oil exports to China through Kazakhstan, Reuters reported on Friday, citing three industry sources, in what could be yet another sign that the oil ties between Russia and China are growing closer.
Rosneft’s CEO Igor Sechin would like to boost oil supplies to China to 13 million tons per year with a possibility increasing them further to 18 million tons, according to a source familiar with Rosneft’s plans who spoke to Reuters. The 18-million-ton annual target would be equal to 36,000 bpd. Rosneft’s crude oil shipments to China via Kazakhstan are expected at some 10 million tons this year.
There hasn’t been any decision on government level yet regarding the plans, according to the source.
“This would mean significant oil supplies cuts to Europe,” the source told Reuters, while two other sources from the oil industry confirmed there were such plans.
Rosneft has gradually boosted its deliveries to China, and this year the Russian company is expected to deliver a record high 800,000 bpd. In previous comments, Sechin has said that he would like to see Rosneft exporting 1 million bpd to China.
Rosneft’s ways of delivering crude oil to China are via the Kozmino port on the Pacific where the Eastern Siberia-Pacific Ocean pipeline ends, via the pipeline’s branch to China. The rest of the oil supplies are made either through Kazakhstan or via railway.
The energy ministry of Kazakhstan told Reuters that Rosneft had not officially asked for increased oil transit via Kazakhstan to China.
In January this year, Rosneft and Chinese CNPC agreed to raise the Russian company’s oil supplies via Kazakhstan.
Russia is currently winning the market share war in China, and was Beijing’s top oil supplier between January and August this year, followed by Angola and Saudi Arabia. Russia had already overtaken Saudi Arabia as the single biggest Chinese oil supplier for 2016, but the OPEC cuts have made that Russian dominance more pronounced this year.
In another Russia-China oil deal, Chinese industrial conglomerate CEFC has recently agreed to buy 14.16 percent in Rosneft for approximately US$9 billion. The deal was no surprise as it came on the heels of a Rosneft announcement regarding the sealing of a strategic partnership deal with CEFC, but it is clearly indicative of a continuing warming between Moscow and Beijing that has given the former the upper hand in a race for market share with Saudi Arabia.